BVR Logo August 21, 2019 | Issue #203-3

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


New platform unlocks the world of M&A valuations

For the first time, direct access is available to documents that reveal the valuation analyses behind M&A transactions. The Valuation Benchmarking Platform (VBP) is a new online tool that allows you to search for transactions that match your target company and compare your multiples, cost of capital, normalized financial forecasts, and other business valuation assumptions with recent work accepted by the SEC and other regulators. The platform includes live links to all the source documents behind the transactions, including valuation reports, board books, and more. The Valuation Benchmarking Platform is updated monthly and currently contains 2,015 reports, 14,700 analyses with assumptions, 20,500 GPC comparables, and 21,700 M&A transaction comparables. These comparables are those that were used in the valuation analyses behind the transactions. You can also see where these comparables were used in support of other transactions. Consider the platform as an add-on to any financial data platform such as DealStats or CapIQ and you will harness insight into comparable business valuations like never before. Why not take a look at the platform? Just click here to request a demo.

Court whittles down damages in Vinoskey ESOP case

The trial court recently unequivocally sided with the Department of Labor in its liability findings against the defendants in the Vinoskey ESOP case, but the court made adjustments to the DOL’s damages calculation that reduced the liability to the defendants considerably.

As reported earlier, the litigation focused on a successful Virginia company and the owner’s decision to sell his remaining 52% stock in the company to an ESOP. The price was $406 per share. A 2009 appraisal valued the stock at $285 per share. At trial, the DOL argued that the transaction price exceeded fair market value (FMV), the trustee had breached its fiduciary duties to the plan by causing it to overpay for company stock, and the owner had accepted a price he knew exceeded fair market value.

Two ‘viable methods’: Under controlling law, to determine the loss to the ESOP, “a court typically subtracts the stock’s fair market value, as determined by the court, from the inflated price paid by the ESOP,” the court explained. Here, the DOL expert’s discounted cash-flow analysis resulted in $11.5 million in overpayment. The defense expert’s DCF-based valuation yielded a per-share price above the transaction price. This expert also performed a separate damages calculation, which the court found “insufficiently thorough” and which calculated $5.5 million in overpayment.

The court said the DOL expert’s valuation and damages calculations were “more reliable touchstones for the Court’s assessment of damages.” But it declined to adopt the expert’s calculations in full. The court found there were two “viable methods of calculating damages in this case.” Under one method, the court would use the DOL expert’s “damages bridge” to calculate damages. Specifically, the expert, using a DCF analysis, identified errors in the ESOP appraisal and calculated discrete damages amounts related to each of the claimed errors. The total amount, $11.5 million, represented the overpayment, the expert claimed.

The court, in making adjustments to the DOL expert’s DCF-based calculation, reduced damages to $7.8 million. But, though the court made its preference for the DCF clear throughout the opinion, the court decided to base damages on a different method: the DOL expert’s “correction” of the contested ESOP appraisal, which was based on the capitalization of cash flow method. According to the DOL expert, the “reworked” appraisal resulted in $7.5 million in overpayment.

“Like all methods of valuing stock, this method is imperfect,” the court said. “In recognition of these imperfections,” the court made certain adjustments that increased the per-share value and reduced the amount of overpayment (damages) to $6.5 million. The court also said it would “be disposed” to reduce the damages amount by $4.6 million, the amount of debt the owner forgave after the transaction. (To finance the transaction, the ESOP received loans from the owner and the company.) The court said its reason for rejecting an offset was that “the weight of authority disfavor[s]” this reduction in damages.

A digest of Pizzella v. Vinoskey (earlier Acosta v. Vinoskey), 2019 U.S. Dist. LEXIS 129579 (Aug. 2, 2019), and the court’s decision will be available soon at BVLaw.

Ex post approach for ERP favored in early survey results

Our latest minisurvey on the cost of capital reveals that the historical approach (ex post) is the preferred approach in estimating the equity risk premium (ERP), cited by 75% of respondents. Fourteen percent of respondents prefer the implied approach (ex ante), which is a forward-looking estimate developed by examining stock prices today and expected cash flows in the future. The remainder (11%) use a combination of both approaches, plus the “survey” approach, which solicits information from investors about the returns they expect. The survey also asks about the specific ERP used and the sources of data, but, before we report on the rest of the results, we’d like a few more responses, so please take the survey by clicking here. Thank you!

The Appraisal Foundation seeks panelists for the BVRP

Qualified candidates are wanted to serve on the Business Valuation Resource Panel (BVRP) of The Appraisal Foundation. The purpose of the BVRP is to oversee the development of valuation advisories, provide input on exposure drafts, and offer insight on emerging issues or other matters of like significance to the board of trustees, Appraisal Standards Board, or Appraiser Qualifications Board pertaining to the business valuation discipline. Currently, there are five vacancies on the BVRP, and individuals selected as panelists will serve staggered terms commencing Jan. 1, 2020, for up to three years. Reappointments thereafter will be made annually as needed. For an application package, click here. Deadline for applications is October 1.

New FASB philosophy staggers effective dates

The Financial Accounting Standards Board (FASB) has outlined a new philosophy under which it plans to extend and simplify effective dates for private companies, smaller public companies, not-for-profit organizations, and employee benefit plans. Under this thinking, a major standard would first be effective for larger public companies and then staggered at least two years later for all other entities. Accordingly, it has issued a proposed Accounting Standards Update (ASU) that would grant private companies, and certain small public companies additional time to implement FASB standards on current expected credit losses (CECL), leases, and hedging. Comments on the proposed ASU are due by September 16.

Not a whiz at statistics? No problem!

The September 2019 issue of Business Valuation Update contains the latest in a series of articles that we call “Tales From the Trenches.” In this installment, veteran appraiser Jim Alerding (Alerding Consulting LLC) tells the story of four engagements in which he effectively used statistical sampling and regression in litigation settings. “It is important, as an expert in a litigation, that you have the proper training and knowledge of the methods and analyses you use in determining damages,” Alerding writes. “If you do not, then it is imperative that you either acquire that knowledge yourself or engage another professional to provide the professional opinion needed to complete the engagement.” The “Tales From the Trenches” series contains important lessons to be learned based on the experiences of seasoned valuation experts. While you may be able to find some of this advice in books, the nuances can only be found in the minds of the experts who have lived through many engagements. Do you have a tale to tell? Contact the Business Valuation Update editor at

Trial offer for BVR's online cost of capital tool

If you haven’t checked out BVR’s new Cost of Capital Professional, now’s the time to do it. A trial offer is now available for this simple, independent service for estimating the cost of capital. The platform is designed to bring more professional judgment and common sense back into the process, which has become too much of a complex “black box” of applied mathematics. It supports the buildup method and CAPM calculations for any valuation date. A custom-designed trial period will be set up for you if you contact a member of BVR’s sales team either at or 503-479-8200 (ext. 2).

Comments wanted on standards for financial instruments

Until now, no effective set of international valuation practice standards for financial instruments has been generally adopted, according to the International Valuation Standards Council (IVSC).The organization’s recently appointed Financial Instruments Standards Board has published an Agenda Consultation, seeking feedback regarding the approach the board should take and how it should prioritize its work. Comments are due September 26. All comments will be published on the IVSC website. The Financial Instruments Standards Board brings together valuation leaders from across the financial world to develop common procedures that will support valuation in this growing and international asset class. The board includes representatives of international banks, prudential regulators, and valuation and accounting firms, and it has begun work to develop international standards in this area of practice.


BV movers ...

People: AJ Lowring, CVA (P&N Consulting Services Group), has been appointed to the position of president of the Louisiana State Chapter of the National Association of Certified Valuators and Analysts (NACVA)Enrique C. Brito, CFA, CVA, CM&AA, has joined Newport News, Va.-based PBMares as managing director of its transaction advisory services team, which includes mergers and acquisitions, business strategy, business intelligence, corporate finance, business valuation, due diligence, and operational improvement; he will be in the firm’s Richmond, Va., office … Jennifer J. Murphy, CPA, CFE, CFF, ABV, recently celebrated her 10-year anniversary with Morones Analytics (Portland, Ore.); she specializes in individual financial damage analysis as well as conducts fraud investigations and forensic accounting analyses.

Firms: American City Business Journals (Charlotte, N.C.) has acquired majority ownership of BizEquity, a provider of cloud-based business valuation tools and private business data … Knoxville, Tenn.-based PYA has joined HLB, a global network of independent advisory and accounting firms … Inside Public Accounting has named Hogan Taylor LLP (Tulsa, Okla.) the fastest growing firm for 2019 based on all reported growth in net revenue, including the influence of mergers … Rehmann, based in Troy, Mich., is expanding its footprint with the opening of a new 6,000-square-foot office in downtown Detroit.

Please send your professional and firm news to us at

Upcoming BVR training events

  • Calculating Damages in Intellectual Property Disputes: New Guidance (August 20), with Jeff Press (EisnerAmper LLP) and Drew Voth (Alvarez & Marsal). This is part of BVR’s Special Series on Intellectual Property.

    Learn about the changes to the theories, techniques, and oft-cited case law intellectual property damages experts address in the patent, copyright, trademark, and trade secret areas. Based on the new 4th edition of the AICPA/CIMA Practice Aid for Calculating Damages in Intellectual Property Disputes.

  • The Due Diligence Imperative in the Era of Value-Based Reimbursement (August 27), with Jessica Bailey-Wheaton (Health Capital Consultants) and Todd Zigrang (Health Capital Consultants). This is part of BVR’s Special Series presented by the BVR/AHLA Guide to Healthcare Industry Finance and Valuation.

    A discussion of the due diligence process of a healthcare transaction amid the rise value-based reimbursement initiatives that has led to a growing number of complexities in the healthcare delivery marketplace.

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

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