Free digests of Daubert and Kumho Tire available
from BVWire

It’s been ten years since the U.S. Supreme Court expanded its ruling in Daubert v. Merrell Dow Pharmaceuticals, Inc. to all types of technical expert testimony—including financial experts and business appraisers—in Kumho Tire v. Carmichael. PriceWaterhouseCoopers has just released its new Daubert Challenges to Financial Experts: A Ten-year Study of Trends and Outcomes, 2000 to 2009. After examining over 5,200 Daubert challenges to expert witnesses of all types, in federal and state courts, the PwC study concludes:

  • Since Kumho Tire, the number of challenges to all types of expert witnesses has increased rapidly, rising from 253 in 2000 to 704 in 2007 to a record 869 in 2009.
  • The number of Daubert challenges to financial expert witnesses has also increased every year: For example, financial experts met 168 challenges in 2009, representing an 8% increase over 2008, which saw a 34% increase from 2007.
  • Economists, accountants, and appraisers are more frequently challenged than all other financial experts, accounting for 23%, 21%, and 8% of all challenges to financial experts, respectively, during 2000–2009.
  • Although more frequently challenged, economists, accountants, and appraisers were more likely to survive a Daubert challenge, enjoying a 51% higher success rate than other financial types.
  • Courts excluded appraisers much less frequently in 2009 compared with the 10-year average. Conversely, courts excluded economists more frequently.

The frequency of Daubert motions also vary widely by jurisdiction, the PwC study found, and plaintiff’s experts are challenged two to three times more often than defense experts (but notably, their exclusion rate is lower).

The Daubert standard applies in most courtrooms today (some states still apply the “general acceptance” or so-called Frye rule). The Supreme Court’s discussion of the Frye rule, the gate-keeping function of trial judges generally—and its four-part test for admissibility of expert evidence under the Federal Rules—is a critical reading for any financial expert.

The full-text of both opinions are available at BVLaw™, of course. For your reference library, we’ve just added digests of both Daubert and Kumho Tire to BVR’s free downloads section here.

Expert advice on the challenging ESOP environment

Join Jared Kaplan (McDermott Will & Emery) and appraiser Robert Gross (Prairie Capital Advisors) next week for “ESOP Valuation: Repurchase Obligations.”  As these two experts will show, a company may be able to exercise “put” options defined in their ESOP in a “financially neutral” manner, but such transactions have serious consequences on the operation and growth abilities of the issuing company, and in turn its value and its ESOP. 

For more information on the webinar click here.  Two CPE credits are available.

No better time to heed expert advice on the necessity of case law familiarity

You’ve heard the admonition at every conference: “you have to know the case law – any business appraiser who is not up on the legal decisions in BV is doing him or herself a disservice!”  BVR has just made it easier than ever for practitioners to gain an advantage when it comes to legal research.  The new and improved BVLaw is better than ever with advanced search functionality that allows subscribers to search BV-specific case law by judge name and SIC code, adding to the existing ability to search by keyword, case type, jurisdiction and date.  There are also over 200 of the most common search terms pre-defined for you in the new “Browse by Topic” section of the database.

BVLaw includes close to 3,000 full text federal and state court decisions involving business valuation as well as abstracts for all cases written by BVR’s team of legal editors. Unlike the big case law databases, each abstract focuses specifically on the business valuation issues presented before the court.  BVR’s legal team is adding new case law every day!  You can now also save the results of your searches using the “My Bookshelf” feature. 

Subscriptions are just $329 per year and include unlimited searching and the biweekly BVLaw Alert.   Firm-wide site licenses are available and trial subscriptions can be arranged by special request.   For more information, contact Linda Mendenhall at 503-2191-7963 ext. 2.

Solvency opinions: a new minefield for appraisers?

From Bloomberg to Editor & Publisher just about every news source in the country has reported on Sam Zell's buyout of the Tribune, the resulting bankruptcy, and VRC’s  flawed solvency opinion.  It is interesting to see what examiner Kenneth Klee’s extensive investigation will do for the business valuation profession.  What do you think?  Send your comments to  

Fairness opinion clarification

Last week’s fairness opinion item (and sample model document) drew feedback from many BVWire readers. Jeffrey Rothschild’s reference to the “Houlihan Lokey model” in the blurb was an indication of a trend towards longer 3-4 page fairness opinions, not an endorsement.  We invite other firms to submit samples of their fairness opinions to share with BVWire readers.  Send comments or samples to

Assessing the probability of securing a license critical in patent valuation

In his firm’s recent newsletter Valuation Developments, Bill Quackenbush (Advent Valuation Advisors) lists critical questions to ask when assessing the value of a patented invention:

  • Market potential
  • Strategic motivation
  • Investment costs
  • Development risks
  • Implementation risks
  • Genesis of the invention
  • Licensee’s commitment
  • Inventor’s reasonableness.

For the full text of the article “Critical Questions to Assess the Value of Patented Inventions” click here.

Leading appraiser profiled in JofA for his creativity

Kevin Yeanoplos (Brueggeman and Johnson Yeanoplos) is profiled this month in the Journal of Accountancy—with a focus on his stroke at age 46, and his music. “After I was discharged from the hospital, I immersed myself in music for its therapeutic effects. Playing guitar strengthened my left hand; tapping to the beat fortified my leg muscles. During this process, I began to understand why my career in business valuation appealed to me so much: It was very similar to being a musician,” Yeanoplos relates.  “When I write a song, I take a set of notes, interpret them, put them together in a final composition, and hope to convey a message to the listener. When I value a business, I look at a set of facts, interpret them, and compose a conclusion in a report, hoping to convey my message to the reader. It’s the same process!”

Read the complete article (including a cool picture of Kevin) here.

The current state of the patent marketplace – an attorney’s view

Raymond Millien (PCT Law Group) told attendees at the National Bar Association’s 85th Annual Convention in New Orleans, LA last week (August 11):

IP is still a highly-illiquid asset class with a very inefficient marketplace.  That is, potential sellers of IP rights historically have been unable to access a large quantity of buyers who are willing to pay a predictable price under an agreed-upon set of conditions.  Furthermore, IP transactions are characterized by difficult acquirer identification, long periods of negotiations and endless due diligence activities.

Click here for the complete article.

Additions to ktMINE’s Royalty Rates and Records Database reflect the active IP market. From the thousands of records filed with the SEC during 2Q, ktMINE identified and added 88 material contracts that contained non-redacted royalty rates.  The effective dates of the newly-added records range from June 29, 1995 to June 21, 2010, with 61% of the agreements containing effective dates between 2009 and 2010.

"Professionals across industries, and across the globe, need to be sure that their IP intangibles analysis stands up against the latest market data," states David R. Jarczyk, COO of ktMINE. "That’s why we place such a high priority on adding the most recent market comparables to ktMINE as quickly as possible."

For more information about ktMine click here.

Link to TAF Best Practices monograph on contributory assets

Last week’s Wire had an incorrect link to The Identification of Contributory Assets and Calculation of Economic Rents, TAF’s first monograph in their Best Practices for Valuations in Financial Reporting series last week.  Click on “Best Practices Monograph” to access the full text report and “Best Practices Tooklit” for illustrative examples.

Early stage valuations present unique IP challenges

As appraisers tackling early stage companies can attest, the intellectual properties and intangible assets of early ventures create valuation challenges. At BVR’s Summit on Best Practices in Valuing Intellectual Property, hosted by Morningstar Valuation Services, expert appraisers Chris Bakewell (Duff & Phelps) and Ron Seigneur (Seigneur Gustafson) will address just these issues in their day-two presentation on “Early Stage Valuation”.  From the valuation of an invention prior to commercial exploitation to early stage methodologies and related data sources, this Summit presentation will get to the heart of IP valuations for firms in their infancy.

More information on this and all other Summit sessions, as well as how to register to attend in person or via a live webcast can be found here.


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