The BV E-Update is your complimentary source for the latest valuation court cases, plus timely practice tips, information, and definitions.
May 16, 2006 Telephone Conference:
Succession Planning Strategies for BV and Litigation Practitioners
Featuring Ron Seigneur , Christine Baker, Ed Dupke, Gary Trugman, and Allan Koltin
Members of this expert panel have been directly involved in Business Valuation (BV)/Forensic Litigation Support (FLS) practice transitions, and will share their experience on the demographic trends, competitive factors, and internal procedures that substantially affect a BV/FLS practice succession. The panelists will examine and explain:
- The differences between a traditional CPA practice and a BV/FLS practice, and their impact on succession planning
- The critical internal processes that will help transfer the BV/FLS brand
- The essential (but often overlooked) provisions in buy-sell and partnership agreements.
You will not want to miss this important session! Earn two interactive CPE credits for participating.
Tuesday May 16, 2006
To register for these and all future telephone conferences, please visit www.bvresources.com ; or call 1-888-BUS-VALU (287-8258)
- Temple v. United States, 2006 U.S. Dist. LEXIS 16171 (March 10, 2006) Judge Heartfield. Court considers discounts for lack of marketability and control for closely-held entities and rejects flawed applications of QMDM and Mergerstat data.
- Nowels v. Nowels, 2005 Ind. App. LEXIS 2039 (November 3, 2005) Judge Bailey. Marital dissolution court offers “well-reasoned” resolution of conflicting S Corporation valuations.
- Wells v. C.J. Mahan Construction Co., et al., 2006 Ohio App. LEXIS 1655 (April 11, 2006) Judge McGrath. Damage claims for excessive officer compensation and distributions are duplicative when valuation accounts for both.
- In Re Luxottica Group, S.p.A. Securities Litigation. 2006 U.S. Dist. LEXIS 6133 (February 17, 2006) Judge Weinstein. Court considers value of CEO non-compete to determine fairness of class-action settlement.
NEW! Click here for your complimentary case abstract of Temple v. United States.
These cases and more are available to subscribers to the BVLaw database at BVLibrary.com. Abstracts will be available in an upcoming issue of Business Valuation Update® at BVLibrary.com.
We’ve recently posted new, online updates to the Pratt’s Stats™ database, adding 183 new transactions of privately-held businesses for a total of 8,511 transactions. The transactions in Pratt’s Stats™ have a median revenue of $1.6 million and a $1.5 million median selling price.
In addition to the Pratt’s Stats™ update, w e have also added new transactions to the following database since the last E-Update:
- Public Stats™ (now has 1,964 count)
These databases and more are available at BVMarketdata.com
Checking the Math on DLOM
Question: I am just starting out in the business valuation industry. Most of what I’m going to come across are small, closely held businesses in which the client holds a 10%-30% interest. If, using a DCF (income approach) model, I have arrived at a value of $ X for the company, then where does the discount for lack of marketability/liquidity come in? That is, if we assume a DLOM of 25%, is the value of a 30% minority interest in the company equal to 30% x 75% x ($X)?
Answer: Your math is correct: If the fair market value of a company on a marketable basis is $10 million, and the discount is 25%, and you are valuing a 30% interest, then the value of that interest is $2.55 million. And in the very near future—the new “DLOM Calculator” (by FMV Opinions, Inc.) will help appraisers more accurately arrive at DLOM for private companies. Based on the underlying data of the FMV Restricted Stock Study™, the DLOM Calculator will be available on a single-search basis this summer at BVResources.com
Espen Robak, CFA (FMV Opinions, Inc.)
Source: BVR’s April 26, 2006 teleconference, “Discounts for Lack of Marketability.” Copies of the conference and transcripts available at www.bvresouces.com
BV Definition of the Week
‘Credible’ valuation assignments
The newly-released 2006 USPAP (effective July 1, 2006) introduces a definition for “credible.”
Although credibility has always been a central concept in developing prior USPAPs, this most recent edition features it more prominently. The new definition—“worthy of belief”—does not really differ from common dictionary and conversational usage. However, in the context of valuation assignments, the 2006 USPAP adds the following language: Credible assignment results require support, by relevant evidence and logic, to the degree necessary for the intended use.
What’s important to know about the new definition? “Credible” in this context will always be relative, not absolute, as the credibility of any assignment will be measured by its intended use. “Assignment results that are credible for one intended use may not be credible for another.”
Source: The Appraisal Foundation ( Washington, D.C.); www.appraisalfoundation.org
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