BVR Logo April 10, 2019 | Issue #199-2

BVWire is your go-to source for the latest in the business valuation profession. Highlights for this week include: 


How to cultivate the biggest source of referrals

Attorneys account for the largest share of business for BV experts and valuation analysts. Business valuation, forensic, and litigation support (BVFLS) firms that work with lawyers get over 44% of their BVFLS revenue from this source, according to a BVR survey. In fact, 40% of all firms in the survey received more than half of their work from attorneys. How do you break in and foster business with lawyers? A few ideas:

  • Approach young lawyers and related groups at local bar associations;
  • Lawyers don’t always fully understand many valuation concepts, so offer to provide in-house training for targeted firms on how to understand basic BV topics;
  • Write articles. Appearing in law magazines or professional publications (such as Business Valuation Update) can help expand your exposure and cement your expertise; and
  • Do some pro bono work. Write a letter to the supervisor of the family court in your area, offering your services in connection with valuation issues for parties who can’t afford an expert.

Also, you should go where lawyers go and meet them. For certain types of engagements, it’s especially important to focus on your networking skills. For example, divorce valuation is a unique niche, and those who are successful develop and maintain strong relationships with legal professionals in the same field and at the same level. Once a family law attorney hires a valuation expert, he or she will start to get referrals for other cases.

Extra: Divorce attorneys will mingle with BV experts at the upcoming National Divorce Conference in Las Vegas May 8-10, presented by BVR and the American Academy of Matrimonial Lawyers (AAML). You can participate as an attendee or as an exhibitor.


Pratt's Stats/DealStats analysis holds up in divorce litigation

A Maryland divorce case illustrates the difficulties an appraiser charged with valuing a small company in the divorce context may face and how he or she may prevail in court.

The wife was the sole shareholder in a tree services business. The issue at divorce was the size of the monetary award to the husband. Initially, neither spouse offered much valuation evidence. The trial court performed a value determination based on a recent tax return that an en banc panel overturned. At the remand hearing, both parties presented expert testimony from CPAs who had valuation credentials.

The wife’s expert found the company had a value of zero. The husband’s expert explained in detail the numerous obstacles he encountered to performing a valuation. The company did not provide all of the requested financial information and the company’s tax preparer and management did not answer most of the questions the expert had asked. The company only made available four years of tax returns and a QuickBooks file, which did not “match up” from an accounting point of view. The expert also said that, from other “tax work,” he was able to see there were accounting problems. He noted “some troubling trends regarding … revenues to operating costs … as time passed.” Sales were declining, but expenses were increasing, he noted.

The expert considered all three valuation approaches but concluded here the market approach generated the only reliable indicator of value. He made it clear that he normally would prefer to do an income analysis, but he didn’t have the necessary information and the information he received was problematic. For the market approach, he used Pratt’s Stats (now DealStats) and attained a value of about $408,000, which he decided was too high for this kind of company. In light of the company’s poor performance, he applied a “very heavy discount for lack of marketability,” i.e., 50%. He recognized the significant payroll tax liability, which would make it less likely that someone would buy the business. The DLOM reduced the fair market value to $204,000.

The trial court found it difficult to reconcile the zero value with the company’s employing 11 people, paying the employee who took over the husband’s job a $65,000 annual salary, allowing the wife to pay herself $40,000 and $50,000 in 2014 and 2015, respectively, and other factors. The court credited the opinion of the husband’s expert, noting his credentials and the detailed explanation he gave of the various valuation methods and the obstacles he faced in doing the valuation.

The state Court of Special Appeals upheld the trial court’s findings.

Takeaway: Courts may be sympathetic to an expert whose work is stymied by the other side’s lack of cooperation. Therefore, talk about it!

A digest for Hultz v. Kuhn, 2019 Md. App. LEXIS 151, 2019 WL 852109 (Feb. 21, 2019), and the court’s opinion will be available soon at BVLaw.

Acquisitions of private firms up 12% in 2018

The number of announced acquisitions of privately owned companies increased from 7,793 in 2017 to 8,761 in 2018 (a 12% increase), reveals the soon-to-be-released 2019 Mergerstat Review. The purchase of privately held companies is a significant component of merger and acquisition activity, the report points out.

Acquisitions of Privately Owned Companies
  Number of Acquisitions % of Acquisition Activity Total Dollar Value Offered (Millions)
2009 4,483 43% 81,087.2
2010 5,997 57% 145,799.8
2011 6,607 63% 285,112.3
2012 6,677 63% 235,703.8
2013 6,232 59% 188,856.1
2014 8,156 77% 362,167.2
2015 8,792 83% 334,861.5
2016 8,315 79% 385,652.9
2017 7,793 74% 378,425.4
2018 8,761 83% 339,182.8

(Source: FactSet Mergerstat Review 2019)

Key drivers: Private firms are being acquired for several reasons. The owner lacks an heir to take over the business and, nearing retirement, needs to sell to achieve liquidity for investment diversification and estate tax purposes. Another common reason for sale is growing pains. Increasing demand for the company’s products or services puts pressure on the firm to become more sophisticated and efficient in its operations. To fulfill these demands, the owner/entrepreneur sells the business to obtain needed financial resources for expansion.

Reminder: Comments due on inventory guidance

In November 2018, the AICPA’s Financial Reporting Executive Committee (FinREC) issued an early working draft of inventory valuation guidance, which is part of a broader forthcoming release of the AICPA’s “Business Combinations Accounting and Valuation Guide.” The feedback period was extended to solicit comments from valuation specialists, preparers, auditors, financial statement users, and other interested parties to further inform the development of this guidance. Comments on this working draft will be accepted until May 1, and they should be emailed to


ASA opens registration for Advanced BV Conference

You can now register for the Joint ASA 2018 Advanced Business Valuation and International Appraisers Conference being held in New York City on August 25-27. There’s an early-bird discount of $100 for in-person attendance if you register by May 15. You can also register for live streaming if you can’t attend in person. There are also some preconference education sessions, such as four-day BV201 (Introduction to Business Valuation, Market Approach) and BV203 (Introduction to Business Valuation, Asset Approach, Discounts and Premiums) and AR201 (Appraisal Review and Management Overview) classes. This is one of the must-attend BV events of the year.

From Cost of Capital to Cryptocurrency in New York City May 20

That’s the theme of this year’s Business Valuation Conference the New York State Society of CPAs will present May 20 in New York City. Roger J. Grabowski (Duff & Phelps), James Harrington (Duff & Phelps), and John Sawyer (Alvarez & Marsal) will present cost of capital in a double session, and Arik Van Zandt (Alvarez & Marsal Valuation Services LLC) will offer cryptocurrency price and valuation. Of course, there are other top-notch speakers who will cover damages methods, use of projections, contingent consideration, scaling the business model for your practice, and an interesting look back at 40 years of the business valuation profession. Register now—early-bird discounts expire April 22.

Updated 'DACH Capital Market Study' released

The 4th edition of the “DACH Capital Market Study” provides an analysis of cost capital parameters and multiples for capital markets of Germany, Austria, and Switzerland. ValueTrust, in cooperation with the Institute of Auditing and Sustainability Accounting of the Johannes Kepler University (JKU) Linz and finexpert, prepared the study. Historical data have been compiled for between Dec. 31, 2012, and Dec. 31, 2018, and will be updated semiannually.


BV movers...

People: Darleen Armour, ASA, has been promoted to managing director, financial valuation and consulting, for Los Angeles-based Marshall & Stevens Inc.; she provides fairness opinions, solvency opinions, and valuations of business and intangible assets for public and private clients … David Duffus, CPA/ABV/CFF, CFE, of Chicago-based Baker Tilly has been appointed president of the Pittsburgh chapter of the Turnaround Management Association; he specializes in applying forensic accounting techniques for damage analysis and valuations David Zafft, CPA, CFA, RICS, has joined Atlanta-based Aprio LLP as a director in its transaction advisory and business valuation services group as the firm expands capabilities in this area … Several appointments at the International Valuation Standards Council (IVSC): Richard Hayler, a partner at Singapore-based Deloitte who specializes in valuation, financial, and accounting issues, has been appointed to the Standards Review Board, which oversees the work of the IVSC’s technical standards boards. Also, three new members have been appointed to the Business Valuation Standards Board: Wolfgang Ballwieser, professor emeritus at the University of Munich (Germany); Henk Oosterhout, managing director at Duff & Phelps (Netherlands); and Richard Stewart OAM senior partner with PwC (Australia).

Firms: Boutique valuation/litigation support firm Vallit Advisors, which partners Mark W. Norris, CPA/ABV, CVA, MAFF, ASA, and Charles W. Rains, CPA/ABV/CFF, ASA, recently formed, has opened a Denver office, led by Brian Broxterman, CFA, ASA, who will serve as director; others in the new firm are Kris Hallengren, CPA/ABV/CFF, ASA, MSF, and Christopher Rosenthal, CPA/ABV/CFF, ASA, AEP, as partners; other offices are in Baltimore; Washington, D.C.; and Annapolis, Md. … Miami-based Berkowitz Pollack Brant celebrates its 40th year in business in 2019 and has grown to nearly 300 professionals in five offices; its business valuation practice includes specialties such as litigation support, estate planning, business secession planning, corporate financing, and matrimonial disputes … San Francisco-based BPM LLP has joined Allinial Global, an association of independent accounting and consulting firms … Rogers Anderson Malody & Scott of San Bernardino, Calif., has joined the Alliott Group, a 65-country alliance of independent professional services firms that includes both accounting and law firms … Atlanta-based Mauldin & Jenkins LLC has acquired Jon Campbell & Associates of Brandon, Fla., an advisory firm to financial institutions, which will join the firm’s Bradenton, Fla., office.

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Upcoming BVR training events

  • The New ROI: Return on Individuals (Keynote Quarterly) (April 18), with Dave Bookbinder (CFGI), Laura Queen (29Bison), Al Cini (Al Cini & Partners), and David Nast (Nast Partners).

    They say a company’s most valuable asset walks out the door every night. But other assets, such as intellectual capital (e.g., patents and trademarks), show up as being more valuable than a company’s human capital. Why?

New and trending LinkedIn discussions

Using a Calibration Model for an Early-Stage Enterprise Investment

The Absence of a Size Effect Relevant to the Cost of Equity

OPM Backsolve and Convertible Debt Financing

Your discussion could be featured here—BVR’s LinkedIn group is a place for valuation professionals to share, discuss, and learn about compelling BV topics. If you’re not already a member, request to join today.

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

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