Purchase price equals value of business caught up in divorce

In Wisconsin, the valuation opinions of two experts were deemed not credible for a business caught up in a marital dissolution. In this case, the husband was the out-spouse arguing for a high value of the wife’s business (Dr. Paul’s brand of herbal products for treating livestock).

Both experts rejected: The wife had bought the business from her parents one year prior to the divorce filing (no gift involved). The purchase price was $500,000 (100% financed by a note from the parents), and she also borrowed $57,920 from them shortly after for working capital. The circuit court rejected the valuation opinions of the experts on both sides and found that the best measure of value was the purchase price/loan plus the working capital loan less any remaining principal at the time of trial, for a net value of $45,230.

One of the husband’s arguments was that the purchase price was not fair market value because it was not at arm’s length. While the court agreed the transaction was not arm’s length, it was the best indicator of value especially since neither expert’s valuation of the business made “logical sense.” The husband appealed, but the appellate court upheld the circuit court’s decision.

The case is Dettloff-Meyer v. Meyer, 2022 Wisc. App. LEXIS 205, and a case analysis and full opinion are available on the BVLaw platform.

Houlihan Lokey updates its PPA study

Analysts at Houlihan Lokey have released its 2019 and 2020 Purchase Price Allocation Study, which examines key data points of purchase price allocations (PPAs) recorded by U.S. public registrants. Among the findings:

• The median allocation of purchase consideration (PC) to intangible assets in 2020 was 34% (unchanged from 2019);

• The median allocation of PC to goodwill in 2020 was 47% (also unchanged from 2019); and

• Healthcare was the only industry with intangible assets and goodwill percentages above the mean and median in 2019 and 2020.

The study reviewed public filings, of which 560 transactions formed the basis of the 2019 study and 475 transactions formed the basis of the 2020 study. The study also provides statistics, other annual data, and a comparison to certain results from its 2018 study. To download a complimentary copy, click here.

Extra: A good basic PPA case study was recently presented during a BVR webinar by Nene Gianfala (Chaffe & Associates). Click here for a recording (free to holders of BVR’s Training Passport Pro).

CFO Tech Outlook names top valuation services providers

Two Top 10 lists of valuation services firms are in a special edition of CFO Tech Outlook magazine. One list is of the “Top 10 Valuation Services Companies for 2022,” and they are (listed alphabetically):

• Andersen (andersen.com);

• B. Riley Financial (brileyfin.com);

• Duff & Phelps (now Kroll) (kroll.com);

• EverEdge Global (everedgeglobal.com);

• FP Transitions (fptransitions.com);

• Hilco Valuation Services (hilcovaluationservices.com);

• Houlihan Lokey (hl.com);

• Objective Capital Partners (objectivecp.com);

• RRBB Accountants and Advisors (rrbb.com); and

• Valuation Research Corp. (vrc.com).

The magazine also comprised a list of “Top 10 Emerging Valuation Services Companies for 2022,” and they are (listed alphabetically):

• Abrams Valuation Group (abramsvaluation.com);

• Advent Valuation Advisers (adventvalue.com);

• Brisbane Consulting Group (briscon.com);

• Economatrix Research Associates (economatrix.com);

• Granite Valuations (granitevaluations.com);

• Meld Valuation (meldvaluation.com);

• Monarch Business Valuations (monarchbusinessvaluations.com);

• Omega Valuations (omegavaluations.com);

• Sun Business Valuations (sunbusinessvaluations.com); and

• Valuation Aspects (valuationaspects.com).

According to the magazine, subscribers nominated firms for the lists, which a market research team then vetted. A panel of senior finance executives and editorial board members made the final selection, the magazine says.

ASA/Pratt Valuing a Business book is delayed

For those of you who have preordered or will order the new sixth edition of Valuing a Business, supply-chain shortages have caused a delay. The original ship date of March 22 has been revised to a projected date of mid-to-late April.

The book, first written by Shannon Pratt in 1981, is being published with underwriting sponsored by the American Society of Appraisers (ASA) Educational Foundation. Pratt passed away, but the ASA assembled a group of contributors to bring the book up-to-date and maintain Pratt’s legacy for the valuation profession.

Extra: A perfect companion to the ASA/Pratt book is Gary Trugman’s Understanding Business Valuation, 6th edition (published by BVR), which has not suffered any supply-chain issues and has been shipping right on schedule.

Save 34% on a BVR webinar

Take your pick of any one of BVR’s upcoming webinars (except the Houston ASA Energy Conference), and you will receive 34% off. You must make your purchase by April 8 to get the discount (use priority code PRIOR6002). But it will be hard to choose among them—there’s quite a lineup of events! On April 14, Jay Fishman (Financial Research Associates) leads a “power panel” looking at some specific industries; on April 20, Ray Rath (Globalview Advisors) covers appraisal reviews for financial reporting; on May 10, Gary Trugman (Trugman Valuation Associates) examines the valuation of health clubs and gyms; and, on May 26, Robert Reilly and Weston Kirk (Willamette Management Associates) do a four-hour workshop on intangible assets and asset-based approaches for going concerns. And there’s more to choose from as well. Click here for the full schedule.

Preorders being taken for the 2022 FactSet Mergerstat Review

The 2022 edition of the FactSet Mergerstat Review delivers comprehensive rosters and statistics on mergers and acquisitions between US, UK, and global privately held, listed, and cross-border enterprises. This is one of the most referred-to sources of industry pricing, premia, and payment terms. Each annual subscription includes current updates via the Mergerstat Monthly Review, an update on M&A activities, trends, and deal data by industry.

Cost of capital parameters in Europe as of
Dec. 31, 2021

ValueTrust has released the 9th edition of its “European Capital Market Study” that serves as a comprehensive compilation of capital market parameters such as cost of capital and implied as well as historical risk premiums for European countries. The study also includes trading multiples and total shareholder returns across a wide range of industries. Here are a few key findings:

• The risk-free rate decreased from 0.33% as of June 30, 2021, to 0.09% as of Dec. 31, 2021;

• The implied market return is at 7.5% as of Dec. 31, 2021, so, taking the risk-free rate of 0.09% into account, the implied market risk premium is 7.4%; and

• The technology sector shows the highest trading multiples on average, followed by the healthcare sector; the financial sector continues to have the least expensive valuation level of all sectors.

The full report is available if you click here.

BV movers . . .

People: Judd Appel, ABV, has been named managing director and national leader of EisnerAmper’s Transaction Advisory Services Group; he has held roles including CFO and corporate development and offers 20 years of experience in transaction services and investment banking with blue-chip companies, leading mergers and acquisitions and connecting clients with institutional investors … Several new additions to the senior ranks at Valuation Research Corp. (VRC): In the New York City office, Eugene Wu (CEIV candidate), a former Grant Thornton director, joins as a senior vice president, specializing in the valuation of business enterprises, intangible assets, and liabilities for M&A, financial and tax reporting, and other strategic matters; in San Francisco, Huan Shu, formerly a vice president at Duff and Phelps, joins as a senior vice president, specializing in complex securities valuation for financial reporting and tax purposes; in Boston, Presiyan Lazarov, CFA, joins as vice president with over 15 years of experience in valuation advisory spanning from prerevenue startups to late-stage, middle-market companies for a variety of purposes; in San Francisco, Steven Nguyen, ASA, joins as vice president, machinery and equipment, after almost two decades with Duff & Phelps; and, in Princeton, Christopher M. Dougherty (FMVA candidate), formerly with KPMG and TD Bank, joins as vice president in the portfolio valuation group.

Firms: Florham Park, N.J.-based Wiss & Co. LLP has acquired Neidich & Co., an accounting firm in Mountainside, N.J., serving privately owned real estate companies … Lenkowski Lonergan & Co. LLP (Middlebury, Conn.) has added Mercik & Bolduc LLC (Enfield, Conn.); the combined firm will operate under the former’s name and will have nearly 20 employees including five partners in the two locations … Southington, Conn., firm Daigle, Smith & Chubet expands its accounting and advisory services through its merger with Mugford & DiBella LLC of New Britain, Conn.; the combined firm will be known as Mugford & DiBella LLC and will operate out of both locations … Whittlesey, a Connecticut-based accounting and advisory firm, has added Bova, Harrington & Associates, which will expand the firm’s footprint in Western Massachusetts.

Please send your professional and firm news to us at editor@bvresources.com.

CPE events

Note: There’s a special 34% discount on either of these webinars (use priority code PRIOR6002) if you purchase by April 8. The discount also applies to other webinars (see schedule), except the ASA Energy Conference.

• So You Want to Testify as a Financial Expert Witness? Testimony Tips, Traps and Video Demonstrations From the Trenches, April 7, 10:00 a.m.-11:40 a.m. PT/1:00 p.m.-2:40 p.m. ET. Featuring: Robert Vance (Forensic & Valuation Services PLC). CPE credits: 2.0.

  A veteran valuation and forensics expert with 27 years of testifying experience gives a unique demonstration of how to deal with subpoenas, Daubert challenges, direct and cross-examination, and trick and dangerous questions—all with video examples.

• Power Panel: Industry Insights, April 14, 10:00 a.m.-11:40 a.m. PT/1:00 p.m.-2:40 p.m. ET. Featuring: Jay E. Fishman (Financial Research Associates), Don Erickson (Mercer Capital), and Bryce Erickson (Mercer Capital). CPE credits: 2.0.

  Take a dive into three industries—sports franchises, oil and gas, and software as a service (SaaS)—with a panel of top thought leaders.