Too often, attorneys and business appraisers fall short or fail entirely to engage in forthright communications about critical valuation-related facts and circumstances until someone’s ox is mired in the proverbial ditch. In this session, L. Paul Hood Jr., a recovering tax lawyer, and Timothy R. Lee, ASA, a seasoned valuation advisor, will discuss a curated list of topics (involving sometimes fierce conversations) about which attorneys and business appraisers need to communicate. The list includes the following topics and issues:

• Defining the appraisal assignment. The engagement inception process is critical toward reconciling the purpose and need of any valuation to the events and motivations behind the valuation. Most of the schisms that cause valuation engagements to veer off course can be traced to a flawed initial engagement planning process and/or to a failure to revise the process and the deliverables as due diligence plays out. Paul and Tim will address the spectrum of valuation defining attributes that comprise an engagement agreement and any collateral concerns that may require clarification.
• Buy-sell agreements. Buy-sell agreements are ubiquitous and virtually always problematic. Experience affirms that confusion and outright conflicts exist in most BSAs regardless of the sophistication of the legal and financial advisors or the size of the business. Paul and Tim will address several issues that frequently create problems when buy-sell agreements are triggered, focusing on what can be done now, with new agreements, or with modifications to existing agreements, to prevent current tensions and ticking time bombs from exploding on clients (and other stakeholders and advisors in the process). Talking in the context of real-life examples, Paul and Tim will discuss:

• The “words on the pages” of buy-sell agreements and entity transfer restrictions in governance documents that must be present to define a workable valuation process and outcome;
• The common, seemingly logical process of retaining and using a “third” appraiser can lead to surprising and disturbing results that may worsen situations that BSAs were originally intended to shepherd;
• The 2017 TCJA can have a major impact on the operation of buy-sell agreements; and
• Valuation expert vs. industry expertise for buy-sell agreement appraisals.

• Report Review. Replication is at the heart of business appraisal review. Paul and Tim, co-authors of A Reviewer’s Handbook to Business Valuation, will share several insights that appraisers and attorneys should discuss regarding the review of business appraisals, including the issues of how much input a lawyer or client should have on the business appraiser’s final opinion and written appraisal report.
• Fair market value and other standards of value. Everyone knows about fair market value, of course, but do we? Paul and Tim will talk about this ever-present standard of value in a new context. There are hypothetical willing buyers and sellers, of course. Both the seller and buyer (investors) must be present in the hypothetical negotiations imbued in a credible appraisal report.
• Litigation insights. In the context of litigation, do you want an expert who testifies or an expert testifier? Advocacy can ruin the credibility of an expert’s opinion and cause the client to lose big in court.
• Hot topics. Time permitting, Paul and Tim will venture into topics that continue to haunt the business valuation community.

A discussion of the following valuable conversations for attorneys and business appraisers to have will be addressed:

• Buy-Sell Agreements and Valuation Processes
  
  • Issues arising from buy-sell agreements and entity transfer restrictions.
    
  • Strategies for creating and modifying agreements to avoid future problems; and
    
  • Real-life examples illustrating common pitfalls and solutions.
    
• Challenges in Appraisal Methods
  
  • Problems with averaging appraisal conclusions and unexpected results.
    
  • Impact of the Tax Cuts and Jobs Act (TCJA) on buy-sell agreements; and
    
  • Comparing valuation expert qualifications versus industry expertise.
    
• Business Appraisal Review
  
  • Key elements to discuss in the review of business appraisals; and
    
  • The role of attorneys in reviewing and influencing appraisal reports.
    
• Fair Market Value and Litigation
  
  • New perspectives on fair market value and hypothetical negotiations.
    
  • Differences between an expert who testifies versus an expert testifier; and
    
  • The impact of advocacy on the credibility and outcome of litigation.
    

1. Participants will receive a comprehensive introduction to the important issues that can arise in the context of a business valuation engagement, from the lawyer’s recommendation and engagement of the business appraiser to attempting to edit or change the business appraiser’s conclusions and/or final business appraisal report;