BVR Logo April 17, 2024 | Issue #259-3

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

More from Hitchner’s BV Myth Busters

They’re up to Myth No. 12, which is, “to value a minority interest in a private business, you must first value it on a 100% control basis.” The Myth Busters, a group of AICPA BV Hall of Famers formed by Jim Hitchner (Valuation Products and Services), have been tackling certain ideas, concepts, or notions kicking around the BV world that they feel need to be dispelled. These myths are covered in the Hardball With Hitchner monthly publication.

Be direct: As for the minority interest valuation issue, Hitchner presents an “alternate viewpoint that I believe has wide consensus,” which is to value minority cash flows directly (“direct method”). The other method is to value enterprise cash flows first and then make adjustments to value the subject minority interests (“indirect method”). It is pointed out, however, that the analyst needs to consider the audience for the valuation. Many triers of fact prefer to see the indirect method—a traditional valuation of a 100% interest and then discounts applied for lack of marketability and control.

Control discounts are derived primarily from data included in the FactSet Review (formerly known as the FactSet Mergerstat Review) and the online FactSet/BVR Control Premium Study. Using the latter, you can separate synergistic purchases and financial purchases, according to BVR.

The other members of Myth Busters are: Harold Martin (Keiter), Ron Seigneur (Seigneur Gustafson LLP), Kevin Yeanoplos (Brueggeman and Johnson Yeanoplos PC), Ed Dupke (Dupke Consulting LLC), and Jim Alerding (Alerding Consulting LLC).

Court excludes valuation expert by mistake

In an Ohio divorce matter, an appellate court has remanded a case back to the trial court because it “abused its discretion” when it excluded a valuation expert’s testimony and report.

Do-over: The case involves a husband’s optometry practice, which his initial expert valued at $222,000 while the wife’s expert came in at $960,000. The trial court found both valuations flawed but favored the least-flawed valuation in agreeing with the higher value the wife’s expert concluded. In his first appeal, the husband argued that the lower court did not address the flaws it saw in the wife’s valuation, and the appellate court agreed, remanding it back to the trial court, which instructed the parties to get a joint expert for a new valuation or “retool” the existing ones.

The wife kept her original expert, but the husband engaged a new expert who concluded a value of $300,000, testifying that the opposing valuation was inflated due to some discounts to insurance payers that did not occur in other years (extraordinary items). But, believing that there was an objection to introducing new evidence, the trial court excluded the testimony and report of the husband’s new expert, so it accepted the wife’s valuation.

Another do-over: The husband appealed again, arguing that there was no objection to the new evidence or the new expert. The appellate court agreed, finding the court made a “reversible error” and ruled that, “because the trial court rendered judgment without examining all the evidence contained in the record, we must reverse the Amended Decree and remand for further proceedings.” The trial court mistakenly excluded the new valuation expert and must consider the expert’s testimony and report.

The case is Miller v. Miller, 2024-Ohio-821; 2024 Ohio App. LEXIS 773; 2024 WL 986859, and a case analysis and full court opinion are on the BVLaw platform.

Still waiting for the DOL ESOP regs

First, they were expected at the end of 2023, then the end of March 2024, but there is no sign yet (at the time of this writing) of the proposed regulations regarding ESOP valuations. The Department of Labor website page that has the agenda for the rule (click here to view) still has the March 2024 date.

No deadline: The regulations (which have no legal deadline) will clarify “adequate consideration” under Section 408(e) of the Employee Retirement Income Security Act (ERISA) of 1974. Guidance will be provided for “acceptable standards and procedures to establish good faith fair market value for shares of a business to be acquired” by an ESOP. It has been four decades since such regulations were proposed but never finalized. Valuation experts have long maintained that the DOL has been playing by its own valuation rules in its aggressive enforcement of ESOPs—rules that are not consistent with accepted valuation standards. After a long winning streak, the courts rejected the DOL’s valuations in several recent and important cases, alleging that the ESOPs overvalued (and thus overpaid for) the stock of the sponsoring companies.

Once the proposed regulations are issued, there will be a two-to-three-month public comment period before they are finalized. There is no word on whether or not there will be a public hearing.

Extra: The ASA has set June 11 as the date for its ESOP conference this year. Details are not yet available. A recap of last year’s conference is in the August 2023 issue of Business Valuation Update (subscription required).

BVR to webcast Energy Valuation Conference May 16

Once again, this year, BVR is pleased to partner with the Houston Chapter of the American Society of Appraisers (ASA) to present a live webcast of the Energy Valuation Conference on May 16. The conference will feature presentations from nationally recognized speakers, who are profession leaders, covering a range of important topics in the industry, including downstream, midstream, upstream, and emerging trends in the growing renewables sector. For the full agenda and to register for the webcast, click here.

Reminder: Quick survey on BVFLS credentials

Many credentials are found in business valuation, forensics, and litigation services (BVFLS) firms and practices. Which ones are more prominent? Is there a “preferred” credential? Who covers the cost? Please take just two minutes to answer a quick survey on this—click here for the direct link. This short survey is part of BVR’s ongoing BV Firm Benchmarking Study in collaboration with Rod Burkert (Burkert Valuation Advisors). All responses are confidential, and the results will be published in the last BVWire issue of the month. Thank you for participating!

Today! Free webinar on BVR’s cost of capital platform

Find out why over a third of survey respondents use BVR’s Cost of Capital Professional platform during a free webinar today, April 17, from 10:00 a.m. to 11:40 a.m. PT (1:00 p.m. to 2:40 p.m. ET). The platform has emerged as an effective lower-cost alternative for practitioners, and it produces very close results compared with other platforms and methods. Join the author of the platform, Dr. Michael Crain, a practitioner for over 30 years before joining Florida Atlantic University, and Ron Seigneur, a practitioner with more than 40 years of experience and the current chair of the ASA’s Business Valuation Committee, for a conceptual overview and practical demo. Also on hand will be Adam Manson, director of valuation data at BVR. Click here to register for this free program (two CPE credits available).

PPAs in India

Almost a third (28%) of the enterprise value of acquired companies in India was allocated to identified intangible assets, and 35% was attributable to goodwill, with the allocation varying considerably from industry to industry, according to an EY study on purchase price allocations (PPAs). The allocation to goodwill in India is largely in line with the proportion allocated in global deals (e.g., in the U.S.). Other key findings:

  • In sectors such as telecommunications, life sciences, retail, consumer products and technology (IT/ITES), a larger portion of deal value is allocated to intangible assets;
  • Capital-intensive sectors, such as real estate and hospitality, energy and metals, allocate more than two-thirds of their enterprise value to tangible assets; and
  • Marketing-related intangibles were the key acquisition driver in the customer products, life sciences, and retail sector; customer-related intangibles seem to be the acquisition driver in the IT/ITES sector.

Noncompete agreements are included in most acquisitions. “However, allocation of value to the non-compete agreement is typically on the lower side, possibly indicating either a shorter life or the perception that the probability/impact of competition is minimal,” the study says.

Preview of the May issue of Business Valuation Update

Here’s what you’ll see:

  • “How to Review a Report’s Valuation Methodology” (BVR Editor). This is part of a series on quality control for valuation engagements, which has emerged as the No. 1 concern at valuation firms and practices, according to BVR’s Benchmarking Survey. The article contains a checklist for an overall review of the income, market, asset, and excess earnings approaches.
  • “Ideas for Solving Two Problems in the BV Profession” (BVR Editor). The business valuation profession needs to be more attuned to academic finance research, according to a letter to the editor of the ASA’s Business Valuation Review by Victor E. Jarosiewicz (Quid Valorem LLC), the chair of The Appraisal Foundation’s Business Valuation Resource Panel. He also has some ideas about attracting more young people to the profession by targeting colleges and universities. Feedback is wanted on the issues and his suggestions.
  • “How Do Your Firm’s Benefits Stack Up?” (BVR Editor). “Flexibility” is the most important aspect of a benefits plan BV firms should be offering to employees, reveals a BVR survey. Also, a look at the levels of signing bonuses BV firms are doling out is included.
  • “Using Rule of Thumb Data to Uncover Cooked Books” (BVR Editor). In addition to using rule of thumb data to corroborate a value conclusion reached using other methods, the data are also helpful for validating historical financials—particularly for cash-intensive businesses. An example and some metrics for cash businesses are presented.
  • “A Channel Analysis Is Key When Valuing a Fast-Food Restaurant” (BVR Editor). There has been a seismic shift in the operations of limited-service restaurants since the pandemic—and there’s no sign of reverting. Channels of revenue have been upended. Therefore, an analysis along these lines is important when valuing these entities, advises an expert in this space.
  • “Practice-Building Tips From the AICPA FVS Conference” (BVR Editor). The largest event of 2024 was the AICPA & CIMA Forensic and Valuation Services (FVS) Conference. While there were many excellent technical sessions, there was good attendance at sessions that related to the management of a valuation or forensics firm or practice—a topic that is gaining in importance in the profession. This article is a recap of those sessions.

The issue also includes:

  • A full section of “BV News and Trends/Global BV News and Trends”;
  • Regular features: “Ask the Experts” and “Tip of the Month”;
  • BV data spotlight: “DealStats MVIC/EBITDA Trends,” “FactSet/BVR Control Premium Study,” “Economic Outlook for the Month,” and the “Cost of Capital Center”; and
  • BVLaw Case Update: The latest court cases that involve business valuation issues with one case featured in a detailed analysis.

To stay current on business valuation, check out the May 2024 issue of Business Valuation Update.

BV movers . . .

People: Tony Alfonso has joined the business valuation team at Atlanta-based Aprio as a partner to lead the firm’s expansion into Phoenix; he has over 25 years of experience serving private equity, corporate clients, and attorneys with strategic business valuation solutions … Sharyl David, CFA, ASA, has joined Houston-based Weaver as a managing director in its growing Valuation Services practice; she is based in the firm’s Sacramento, Calif., location and focuses on valuations for ESOPs, mergers and acquisitions, corporate planning, and trust and estate planning … Ian Johnson, CPA, has joined Madison, Wisc.-based Capital Valuation Group as a business valuation analyst; he formerly was with a large accounting firm doing audit work; he says he’s excited about digging into the “story behind the numbers and identify what is driving the trends for each unique business we are working with based on where the business has been, as well as what it means going forward” … Several promotions to managing director in the Financial and Valuation Advisory practice at Houlihan Lokey: Eric Jourdan, CPA (Chicago office); Hugh Nelson, CFA (New York City); Susanna O’Brien, CFA (Boston); and Dan O’Donnell, CFA (Dallas).

Firms: Tampa, Fla.-based Crete Professionals Alliance (Crete PA), a group of accounting and professional services firms, announced a partnership with Reid Tax & Advisory Services, which provides business valuation services under its M&A and transaction advisory practice, and has offices in Long Island (N.Y.), Boca Raton (Fla.) and New York City … Dark Horse CPAs (“a better way to CPA”) will soon be adding business valuation services to its offerings … Chicago-based Crowe has expanded its presence in California through an agreement with Irvine, Calif.-based KMJ Corbin & Co. (KMJ), which provides accounting, auditing, tax, and consulting services to public and private companies in the small to middle markets.

Please send your professional and firm news to us at

CPE events

Cost of Capital Professional—Straightforward, Credible, Cost-Effective (FREE WEBINAR), April 17, 10:00 a.m.-11:40 a.m. PT/1:00 p.m.-2:40 p.m. ET. Featuring: Dr. Michael A. Crain (Florida Atlantic University), Ronald L. Seigneur (Seigneur Gustafson LLP), and Adam Manson (BVR). CPE credits: 2.0.

This presentation gives a conceptual overview and a demo of Cost of Capital Professional from BVR that integrates data from multiple credible sources, including the University of Chicago’s Center for Research in Security Prices (CRSP), Professor Aswath Damodaran, Salvidio & Partners, and the U.S. Federal Reserve.

Top Issues Impacting Cannabis Valuations, April 18, 10:00 a.m.-11:40 a.m. PT/1:00 p.m.-2:40 p.m. ET. Featuring: Stacey D. Udell (HBK Valuation). CPE credits: 2.0.

If you have seen one cannabis business, you have not seen them all—they are all different. This webinar will focus on adult use legalization, section 280E, geography, research and resources, and other important issues impacting valuations in the cannabis space.

We welcome your feedback and comments. Contact Andy Dzamba (Executive Editor) at:


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