BV profession needs a stronger connection to research

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). He is a valuation practitioner, former finance professor, and is the current chair of The Appraisal Foundation’s Business Valuation Resource Panel.

Disconnect: In his letter, Jarosiewicz wonders why “the large and growing body of finance research—on topics of central interest to valuations—go unmentioned” in the various business valuation publications. Much of this research could directly affect and possibly improve valuation practice, he writes, but all he sees are retreads of the same old body of knowledge. He asks, “[W]here is the new science, the new thinking that leads to new and improved solutions? Updating our BV body of knowledge with current research is a must if BV is to advance and to attract young new talent to the profession.”

Jarosiewicz proposes to resurrect a feature, “Valuation Research Notes,” that once appeared in the Business Valuation Review. BVWire agrees that there should be more awareness of academic research in the valuation profession, and we cover research when we come across it. The trouble is some of it can be difficult to read and challenging to connect with actual valuation practice.

On another matter, Jarosiewicz has some ideas (also in his letter) about attracting more young people to the profession by targeting colleges and universities. One is to revive an idea of establishing a degree-granting program in valuation. He asks for feedback on these issues and his suggestions.

Extra: Speaking of research, a quick search turned up a recent working paper of interest, “Financing and Valuation of Intangible Assets,” by Nicolas Crouzet and Yueran Ma (Northwestern University and University of Chicago). The paper is a review of financing arrangements for intangible assets, and it provides an assessment of the valuation methods in the financing context.

Absent any valuation, court uses book value

In an Ohio divorce case, neither the husband nor the wife engaged a valuation expert to appraise the family business, a small company that manufactures parts for racing cars, firearms, and paintball guns.

Off target: The trial court’s magistrate, without any submitted evidence, valued the company at $541,068, which was based on the amount of depreciable assets listed on the company’s tax return. The husband objected, which the trial court sustained. The magistrate then valued the company at $27,143, which was the book value. Then the wife objected, but the trial court overruled her objection and accepted the lower valuation. The wife appealed, contending that the valuation approach was inappropriate.

The appellate court affirmed the trial court’s decision. Because neither party presented any evidence of valuation, the trial court did not “abuse its discretion” by figuring the valuation the way it did.

The case is West v. West, 2024-Ohio-1086; 2024 Ohio App. LEXIS 1024; 2024 WL 1253031, and a case analysis and full court opinion are on the BVLaw platform.

Survey results: What policies do BVFLS firms have regarding credentials?

It’s neck and neck when it comes to the business valuation credentials that exist at firms recently surveyed. Fifty firms responded to the survey that found the CVA credential exists in 65% of the firms, while the ABV is in 63%, and the ASA is present in 58% of the responding firms. These findings merely represent the existence of a credential at a firm, not the number of individuals with that credential. There are more than twice as many CVA credentials in the market as the ABV and ASA combined, so that proportion should play out in firms on average.

Other prominent credentials at the responding firms include the CPA (84%), CFA (53%), and CFE (38%), which is Certified Fraud Examiner. Other findings include:

• Forty percent of firms require staff to pursue credentials, while 46% “recommend” that they pursue them;

• Sixty-three percent have a “preferred” credential, which is the ASA for 51% of those firms that prefer one, while 22% favor the CVA, and 7% prefer the ABV; and

• In terms of covering the costs, almost all firms (96%) cover the cost of obtaining a credential, while 94% cover the costs of maintaining the credential (e.g., ongoing CPE).

The full results (including comments from respondents) will be posted in BVR’s Free Downloads web page at the end of this quarter. This survey is part of BVR’s ongoing BV Firm Benchmarking Study in collaboration with Rod Burkert (Burkert Valuation Advisors). We will have another one in next week’s issue. Thank you all for participating!

Valuation experts make the first Forbes list of Top 200 CPAs

The inaugural Forbes Top 200 CPAs list includes several practitioners who are credentialed in business valuation (ABV, CVA, or ASA). They are:

• Vic Alexander, CPA, ABV, CFF, chief manager, KraftCPAs (Nashville, Tenn.);

• Tony Argiz, ASA, ABV, CPA, CFF, CFE, CGMA, managing principal, South Florida, BDO USA (Miami);

• Larry Autrey, CPA, ABV, managing partner, Whitley Penn (Fort Worth, Texas);

• Shelly Bedford, CPA, MST, CVA, managing partner, Dennis, Gartland & Niergarth (Traverse City, Mich.);

• Allen Carroll, CPA, ABV, CFF, CVA, partner, Wilkins Miller (Mobile, Ala.);

• Richard Craig, CPA, ABV, CFF, CVA, MAFF, CITP, MCP, managing partner, 415 Group (Canton, Ohio);

• Brian Lang, CPA, CVA, CEPA, CEO, SSC CPAs (Topeka, Kan.);

• Karen Lascelle, CPA, CVA, CFE, managing director, John G. Burk & Associates, CPAs (Keene, N.H.);

• Harold Martin, CPA, ABV, CFF, ASA, CFE, director, Keiter CPA (Glen Allen, Va.);

• Mike McCarthy, CPA, CVA, managing partner, Hancock Askew (Savannah, Ga.);

• Edward Mendlowitz, CPA, ABV, partner, Withum (East Brunswick, N.J.);

• Stacey Udell, CPA, ABV, CFF, CVA, principal, HBK CPAs & Consultants (Cherry Hill, N.J.);

• Joel Valentine, CPA, CVA, CM&AA, CGMA, CEO, Wessel (Johnstown-Somerset, Pa.);

• Lance Weiss, CPA, CVA, owner, SFW Partners (St. Louis);

• Kevin Yeanoplos, CPA, ABV, CFF, ASA, shareholder/director, Brueggeman & Johnson Yeanoplos (Tucson, Ariz.); and

• Bruce Zicari, CPA, CVA, CEO, The Bonadio Group (Rochester, N.Y.).

BVR is pleased that several of its editorial board members, Harold Martin and Kevin Yeanoplos, made the list. Also, Stacey Udell recently did a webinar for BVR on cannabis valuations.

Common thread: In addition to their obvious technical skills, all these professionals have given back to the community and the profession in some way. They serve on committees and boards at various local groups as well as accounting and valuation professional organizations. Other efforts include speaking at conferences and on webinars, writing books and articles, and teaching (some are adjunct professors). These endeavors are crucial in advancing the valuation profession.

BVR congratulates all the professionals who made the Forbes list!

April 2024 issue of Willamette’s Perspectives is released

The April 2024 issue of the quarterly digital publication Perspectives, from Willamette Management Associates, has been released, and you can access it if you click here. Willamette staff members wrote all the articles, and this latest issue includes:

• “Control Considerations in the Valuation of a 50 Percent Ownership Interest” (Chad M. Kirkland);

• “The Expatriation Tax: How to Present Assets to the IRS When You Say Goodbye to the United States” (Samuel S. Nicholls); and

• “The Valuation of Controlling Ownership Interests in the Context of Gift Tax Planning” (Timothy J. Meinhart).

Nathan Novak and Meinhart served as editors for this issue.

Watch the WIPO event on IP finance and valuation

Now available is a free recording (audio and video) of IP Finance Dialogue: Expanding Horizons on IP Finance and Valuation that the World Intellectual Property Organization (WIPO) presented in Geneva. The theme of the six-hour event was “expanding horizons on IP finance and valuation.” Speakers explored alternative strategies and novel approaches to unlock intangible assets and IP finance, including best practices. There was also a presentation of WIPO’s action plan and a review of its work from the past year as well as an outlook on future endeavors. You can access the recording if you click here.

BV movers . . .

People: Ed Usalis, AM, CVA, has joined the business valuation practice at BuckheadFMV, an Atlanta firm that specializes in healthcare valuation and consulting; he has over 25 years of experience providing business valuation, litigation support consulting, and financial advisory services, and he has prepared business valuations for federal gift and estate tax returns, estate planning, employee stock ownership plans, financial reporting, and mergers and acquisitions … Yuhi Kamimura has joined Prairie Capital Advisors Inc., a corporate advisory and investment banking firm, as director; he will be part of the firm’s Oakbrook Terrace, Ill., office and will focus on advising middle-market companies, shareholders, and trustees on employee stock ownership plan (ESOP) transactions, fairness opinions, leveraged buyouts, capital raising, mergers and acquisitions, and other strategic advisory engagements … Lori A. Roth, CPA/ABV, CFF, global managing partner at Prager Metis, has been named to the Schneps Media Power Women of Manhattan List; she is based in Basking Ridge, N.J., and oversees all of the day-to-day operations for the entire firm and provides guidance and oversight to each of the firm’s office managing partners and service line leaders.

Firms: Los Angeles-based Marshall & Stevens, an independent valuation and dispute consulting firm, has been on a recent buying spree, acquiring Value Consulting Group (headquartered outside Minneapolis), and two Salt Lake City firms, Lone Peak Valuation Group and Rocky Mountain Advisory … New York City-based Marcum’s technology unit has released its AskMarcum.ai tool to outside users; the AI tool began as an internal initiative to advance the firm’s operational efficiency, but it sparked interest from other organizations looking to optimize workflows and make smarter decisions. Marcum recently used the tool to build Visual Basic code for Excel to perform data analysis and automation rapidly with a complex Excel workbook for a client deliverable … New York City-based CohnReznick has launched a digital advisory practice.

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

CPE events

BVLaw Case Update, April 24, 10:00 a.m.-11:40 a.m. PT/1:00 p.m.-2:40 p.m. ET. Featuring: R. James Alerding, Alerding Consulting LLC; James D. Ewart, James D. Ewart LLC; and Andrew Z. Soshnick, Faegre Drinker Biddle & Reath LLP. CPE credits: 2.0.

Two veteran valuation experts and a family law attorney/valuation expert examine recent valuation and financial litigation decisions.

A Saga About S Corporation Tax Affecting: It’s a Thriller! (A BVR Workshop). May 8, 10:00 a.m.-1:15 p.m. PT/1:00 p.m.-4:15 p.m. ET. Featuring: L. Paul Hood Jr., The University of Toledo Foundation. CPE credits: 3.5.

This presentation provides a comprehensive, up-to-date discussion of a still-unsettled issue: whether earnings of an S corporation should be “tax affected,” i.e., increased or offset to account for S corporation status.