BVWire Issue #166-1 | July 13, 2016


Sex tape award in Hulk Hogan case hinged on website valuation

During the trial in which Terry Bollea (Hulk Hogan) sued the website Gawker over the now infamous sex tape, a valuation expert testified about the amount of damages. But it was not a question of damages over the right of publicity but rather one of unjust enrichment—that is, the gain in value of the Gawker website due to its misuse of Hogan’s assets (his brand and other intellectual property).

Methodology: Content-driven websites such as Gawker generate revenue primarily from advertising. These websites are often valued based on a multiple of monthly unique users, according to Jeff Anderson (CONSOR), who was the testifying expert in the Hogan case. “We calculated the benefit to the website by analyzing the change in value from before the video was posted (pre-damages period) to after the video was removed (post-damages period).”

The website’s value was determined using a monthly unique user multiple, which was developed based on transactions for comparable websites, Anderson explained during a recent BVR webinar. The analysis revealed an average multiple of $19.34x (which they considered an upper bound). Using this multiple applied to the website’s traffic before and after the video, the Gawker website increased in value by $54.1 million. Based on traffic the sex tape specifically triggered, it was then determined that 28.5% of the overall traffic was attributable to the video. That percentage was applied to the $54 million overall increase in value to get $15.4 million—the increase in website value attributed to the sex tape.

Daubert challenge: “The opposition kept trying to get me to admit that no one had ever valued a website based on monthly unique users,” says Anderson. That’s not exactly true, Anderson points out, but there was nothing in the literature nor in court precedent about it. Nevertheless, he succeeded in fending off the challenge by arguing that the core value driver of a content-driven website such as Gawker is the traffic from unique monthly users. Lesson learned: “Stick to your guns,” he advises.

In the end, the jury felt that all of the $54 million increase in website value was due to the sex tape, so it did not apportion any of it in coming up with the award. The jury’s overall award to Hogan was $140 million (which included other elements of damages).

More details: An article in the August issue of Business Valuation Update gives more details on the winning valuation methodology used in the case.

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Most firms report increase in BV revenue

Early results from BVR’s Firm Economics Study reveal that more than half (57%) of firms that have responded so far say their business valuation revenues increased in 2015 compared to 2014. However, these results are preliminary, and we have extended the deadline to give more firms a chance to participate in this important study. BVR hopes that this confidential survey will strengthen the profession by helping appraisers benchmark and improve their practice management.

Deadline now July 22: If you take the survey, you’ll see how your firm stacks up in relation to your peer firms’ performance, compensation, billing rates, marketing, practice development, and more. When you participate, you’ll receive a free Executive Summary of survey results, plus a special offer to purchase the full report for $99 (regular price is $299). Click here to participate now. Thank you!

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Florida may switch back from Daubert to Frye

The Florida Supreme Court will hear oral arguments September 1 to decide which standard the state’s courts will use for expert testimony, according to an article in the Florida Record. The legislature approved the Daubert standard in 2013, but the Florida Bar Board of Governors recommends going back to the Frye standard. Frye is less strict than Daubert in terms of what can be considered expert testimony.

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Limited evidence of correlation between hospital size and revenue multiple

The median revenue multiple for hospitals with less than $100 million in revenue was approximately 0.62x compared to 0.79x for hospitals with $250 million to $650 million in revenue, according to an analysis of VMG Health’s hospital transaction database. However, a closer look reveals that there is a wide variance and range inside each category. “Overall, we observe limited evidence of a correlation between revenue size and revenue multiple,” VMG says in an article. The implication of this is that factors other than size need to be considered in the valuation analysis.

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Moody’s explains new credit impairment model for banks

A report from Moody’s Analytics explains the new credit impairment model, known as the current expected credit loss model (CECL), for the recognition and measurement of credit losses for loans and debt securities The CECL is in the FASB’s recently released accounting standards update for credit losses (ASU No. 2016-13).

Huge change: Financial statements will have to show credit losses on loans and other financial instruments in a more timely fashion under the new standard. “This new standard is far more than an exercise in financial accounting and bank regulation,” says the Moody’s report. “It will replace the current incurred loss model with an expected loss model, one of the most significant changes in the history of bank accounting.”

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A deadly sin of quantation: the pie chart

Everybody likes pie, but stay away from those pie charts, advises Randell Bolten, the author of Painting With Numbers: Presenting Finances and Other Numbers So People Will Understand You. At the recent NACVA conference in San Diego, BVWire attended Bolten’s session on “quantation,” his portmanteau of quantative and communication. Quantation is the act of presenting numbers, such as financial results, electronically or in written form for the purpose of informing an audience. As an appraiser, you want your audience to spend more time absorbing the information in your reports and less time trying to figure out how to read your reports. Bolten gave attendees his list of “deadly sins” of quantation, one of which is “Using a pie chart. Period.” So stop doing that, he advises.

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Global BV news:

NACVA has launched Global Association of Certified Valuators and Analysts (GACVA) to “open its doors to the international financial consulting community and those organizations and individuals interested in obtaining, holding, and supporting” the various valuation and financial forensics credentials the group provides. GACVA is an umbrella group for international chapters, which currently include Africa, Canada, Europe, the Middle East, and Taiwan.

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What’s the world’s most valuable cricketing league?

You guessed it—the Indian Premier League, according to Duff & Phelps. The total value of the IPL has grown by 19% over the last five quarters, to $4.16 billion (USD) immediately after Season 9, which is up from $3.54 billion (USD) after Season 8—despite the fact that the USD-INR currency has depreciated by nearly 10%. The Mumbai Indians have the highest brand value in the IPL, at $78 million. See the report, “Playing With a Straight Bat: A Concise Report on Brand Values in the Indian Premier League.”

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The Appraisal Foundation seeks ASB and AQB board candidates

Do you have the desire to serve on one of The Appraisal Foundation’s national boards—or know someone who does? If so, TAF is currently conducting its annual search for qualified candidates to serve on the Appraiser Qualifications Board (AQB) and the Appraisal Standards Board (ASB). The AQB is responsible for establishing the minimum education, experience, and examination qualification criteria for real estate appraisers. The ASB is charged with developing, interpreting, and amending the Uniform Standards of Professional Appraisal Practice (USPAP).

Individuals selected for these positions will serve a term of up to three years starting on Jan. 1, 2017. For an application package, click here. Deadline for applications is Aug. 15, 2016.

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Pratt’s Stats hall of famers for 1Q16

Pratt's Stats now lists close to 25,000 private-company M&A transactions—thanks to business brokers and other intermediaries who contribute the data. Individuals who send in the most transactions are inducted into the Pratt’s Stats Hall of Fame. For the first quarter of 2016, they are:

  • Bill Gibson, William E. Gibson & Associates Inc. (Pensacola, Fla.); and
  • Tim Bellon, Southshore Advisory Partners LLC (Apollo Beach, Fla.).

Thanks Bill and Tim for helping BVR build Pratt’s Stats into the most reliable data source of its kind. We’d also like to point out that the database now includes secondary and tertiary SIC and NAICS codes, new dedicated purchase price allocation fields, and new search fields including sale region, whether a company was a franchise, and whether the purchase included real estate.

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BV movers . . .

People: Robert Alexander, director of fraud, forensic, and litigation services at the Mississippi-based HORNE, was re-elected to its board of directors … Amanda Clack, partner and head of infrastructure (advisory) at Ernst & Young in the United Kingdom, was elected the 135th president of the Royal Institution of Chartered Surveyors (RICS) … Brad Matthews was promoted to manager of the business valuation and litigation support services group at the Pittsburgh firm Grossman Yanak & Ford … Douglas L. Smith was admitted as a partner at the Pennsylvania firm Reinsel Kuntz Lesher; he specializes in healthcare, professional services, construction, and manufacturing sectors, particularly with regard to estate planning, business valuation, and M&A … Chris Volz, director of business valuation and litigation services, was promoted to partner at the St. Louis firm Mueller Prost.

Firms: CliftonLarsonAllen has added the Tucson, Ariz., firm Peto & Co. CPAsGrant Thornton expanded its presence in Hong Kong by acquiring Mabel Chan & Co.Grimbleby Coleman CPAs of Modesto, Calif., was honored with the California Society of CPAs’ 2016 Public Service Award, which recognizes a California firm for its philanthropic contributions at the local, state, or national level … Mountjoy Chilton Medley (MCM) has merged with the Cincinnati-based office of Elliott Davis Decosimo on July 1, bringing MCM to nearly 300 employees in five offices throughout Ohio and Kentucky … Denver-based RGL Forensics merged with Florida-based Stahl Forensic and Valuation Experts on July 1; Stahl’s two principals, Briggs Stahl and Diane Womack, have joined RGL as full partners … On July 1, Stout Risius Ross proudly celebrated its 25th anniversary. Congratulations!

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July sizzles with CPE events

Valuing Timeshares and Unique Provider-Based Arrangements in Healthcare (July 14), with Schaeffer Smith (Horne LLP) and Brooke Pierce (Horne LLP). This is Part 3 of BVR's Special Series presented by the BVR/AHLA Guide to Healthcare Industry Finance and Valuation, fourth edition.

Misuses of IP Over the Internet: Searching for Value (July 21) with Brian Buss (Nevium Intellectual Property Solutions) and Doug Bania (Nevium Intellectual Property Solutions). This is Part 4 of BVR's Special Series presented by The Comprehensive Guide to Economic Damages.

Tax Issues Arising in Valuations (July 26), with Patrice Radogna (Valuation Research Corp.) and Heather Tullar (Valuation Research Corp.).

Valuation of Options and Option-Like Instruments, (July 27), with Oksana Westerbeke (Grant Thornton) and Jared Hannon (Grant Thornton).

Important note to webinar attendees: To ensure that you receive your dial-in instructions to BVR’s training events, please make sure to whitelist

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We welcome your feedback and comments. Contact Andy Dzamba (Executive Editor) or Sylvia Golden (Executive Legal Editor) at:
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In this issue:

Sex tape value

BV revenues up

Daubert v. Frye in Fla.

Hospital size/multiple

Credit impairment

No pie please

Global BV news

TAF needs you

Pratt's Stats HOF

BV movers

CPE events

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