Another case of lopsided valuation experts

A Minnesota divorce case is an example of why judges can get the perception that valuation experts are hired guns. The wife’s expert valued the husband’s interest in an asset management company at $5,067,804, while the husband’s expert came up with $138,418. True, there can be legitimate reasons why two valuation experts come up with widely disparate values for the same entity, so there can be some middle ground. But, in this case, a district court gave the husband’s expert’s opinion “little evidentiary weight” and an appellate court affirmed the decision.

Way off: Among other disparities, the husband’s expert based the valuation on only one year—a year in which no performance fees were paid. The valuation ignored over $14 million in performance fees that were paid over the prior four years. Also, a 2% profit margin was used to compute income that was one-tenth of the operating income from the prior four years. It also did not account for why the husband’s dividend in the year of separation “was more than nine times greater than what he proposed the company was worth.” The husband also argued that he had personal goodwill, but he did not provide any indication of its value.

The case is Tennebaum v. Deshpande, 2023 Minn. App. Unpub. LEXIS 630,and a case analysis and full court opinion are on the BVLaw platform.

Don’t get stung by a bad review of your valuation report

Shawn Hyde (Canyon Valuation) has been reviewing the reports of other valuation experts for years. During a recent BVR webinar, he presented a seven-page review report (disguised, of course) that concluded that the valuation was likely incorrect. Hyde’s review pointed out five major areas in the report where either material errors were made or underlying assumptions may have led to erroneous conclusions. The review was done at the request of an attorney who wanted to know whether a second valuation should be done.

Better timing: A question from the audience: Wouldn’t it be better for the report’s author to have gotten the review before submitting it to his client? An unfavorable review may give the client second thoughts about hiring that expert again. Hyde agreed that doing a review before submitting it would be optimal but pointed out that there often is not enough time to do that. How much time should you allow for a review? It could be just a few days if there’s someone at your practice who can do it. When using an outside reviewer, it depends on the workload of the reviewer, but about two weeks is a good estimate.

A recording of the webinar, Appraisal Review—Read Between the Lines, Too! is available if you click here (free to BVR Training Passport holders).

BV practice marketing budgets hold steady for 2023

Since most business valuation firms and practices are very busy, it’s not a great surprise that marketing budgets for 2023 are about the same as 2022 levels, according to the 2023 BVR Benchmarking Survey. More than half (58%) say the amounts they spend on marketing and practice development activities will not increase from 2022 levels, and another 28% say they will see just a “small increase.” Of the rest, only 10% say they plan a “significant increase” and 4% expect to spend less. Much more information was collected about marketing and many other aspects of operations from almost 200 business valuation firms and practices that responded to the survey. We are analyzing the results, which will be made available as soon as possible.

NACVA ‘blown away’ by ChatGPT

David Fein of ValuSource recently gave a demo of ChatGPT to Parnell Black, CEO of the National Association of Certified Valuators and Analysts (NACVA). Black was working on a job posting, so he put ChatGPT to work on it and told it to include why NACVA was a great place to work. In less than a minute, the results appeared—to Black’s astonishment. “Needless to say, not only was I blown away, but in disbelief because this is all true,” he wrote in his latest quarterly message. He gave it some more tasks to do and was equally impressed. Black also noted that ValuSource currently uses ChatGPT to help with complex programming issues and content for marketing purposes. Going forward, “David is quickly working to incorporate ChatGPT into every department at ValuSource,” Black remarked.

2023 Stout restricted stock study guide now available

The 2023 edition of the “Stout Restricted Stock Study Companion Guide” is now available, and it reflects updated tables and graphs that contain new transactions. The study is the most widely used restricted stock transaction database for providing empirical support for a discount for lack of marketability (DLOM), according to the BVR surveys. To download the new guide, which is free to everyone, click here.

Panel on trial testimony featured at VSCPA

How to survive expert testimony and cross-examination is one of the most popular topics at the annual two-day Forensic and Valuation Conference held by the Virginia Society of CPAs (VSCPA). This year’s event will be held September 26-27 in Glen Allen and will include a panel on trial testimony moderated by conference chair Harold Martin Jr. (Keiter). The panel members will include nationally known valuation experts Kristopher Boushie (NERA Economic Consulting), Kevin Yeanoplos (Brueggeman and Johnson Yeanoplos PC), Neil Beaton (Alvarez & Marsal Valuation Services LLC), Ron Seigneur (Seigneur Gustafson LLP), and attorney Martin Cunniff. For more details on the conference and to register, click here. This will be an on-site event with the option of attending virtually.

Congrats to the winner of a free BVR Pro subscription

Rob Leibfried, a shareholder in the business valuation practice at Honkamp, will receive a free one-year subscription to BVResearch Pro, BVR’s most comprehensive library of business valuation resources. He entered a drawing as a respondent to the 2023 BVR Benchmarking Survey, and his name was picked out of the fishbowl. Congratulations, Rob! He’s a CPA and holds the ABV credential as well as the Certified Divorce Financial Analyst (CDFA) credential.

Rob is responsible for overseeing his firm’s valuation department and engagements, and his experience includes valuations for succession planning purposes, buy-sell agreements, estate planning purposes, matrimonial actions, mergers and acquisitions, and business sales.

BVResearch Pro is the largest library of knowledge in the profession and contains full-text books, journals, articles, court case analyses, webinar transcripts, profession news, and much more. For details, click here.

IVAS-IVSC conference October 3-4

The leading business valuation conference in Asia Pacific is the IVAS-IVSC Business Valuation Conference, and the next one will be October 3-4. The conference theme is “The Future of Business Valuation: Embracing Shifts and Innovation.” The agenda includes topics such as environmental, social, and governance (ESG) factors as well as intangible assets, generative AI and its impact on business value, and more. Professor Pablo Fernandez (IESE Business School, University of Navarra) will hold a two-and-a-half-hour master class, and Anton Colella, chief executive of Moore Global and an IVSC trustee, will give the keynote. The event is organized by the Institute of Valuers and Appraisers, Singapore (IVAS) in partnership with the International Valuation Standards Council (IVSC). For more information and to register, click here.

Elder talks about global themes at the V20

Ben Elder, global director of valuation at RICS, discussed the dynamic relationship between valuation and global themes of people, planet, prosperity, and principles during an interview with Ray Moran (FON Valuation Services). These themes are front and center at the V20 Valuation Summit and Conference October 27-29 in New Delhi, and they are challenging to valuers of every discipline, from real estate to intangibles to business entities, Elder remarked.

You can watch the video if you click here (the video includes links for more information on the conference).

Papers due August 31: There is a call for papers on several important themes, including technology, ESG, and more. Selected papers will have an opportunity to be published in peer-reviewed conference proceedings. Submissions of abstract papers are due August 31. For details on the call for papers, click here.

The event is co-hosted by the Assessors and Registered Valuers Foundation (AaRVF) and the International Valuation Standards Council (IVSC). The Royal Institution of Chartered Surveyors (RICS) is one of the participating organizations for the conference. BVR is the event’s international media partner.

BV movers . . .

People: Mercer Capital, a national business valuation and financial advisory services firm, has added several recent college grads as financial analysts: John Farris, Rayan Itani, Elizabeth Mueller, Brown Myers, and Alex Rodriguez … Windham Brannon LLC of Atlanta has chosen principal Laura Berry to lead its advisory services practice, which includes business valuation services.

Firms: Atlanta-based Smith + Howard will add Market Street Partners PLLC of Chattanooga, Tenn., which provides a wide range of accounting and advisory solutions for businesses and individuals, including valuation and litigation support … Eide Bailly is adding Sherman Oaks, Calif.-based firm Bessolo Haworth, a full-service accounting and financial-services firm with a clientele that includes middle-market companies and high-net-worth individuals throughout the Los Angeles, San Francisco, and Seattle areas; five partners and 20 staff members from Bessolo Haworth will join the Eide Bailly team.

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

CPE events

• Power Panel: How Should Healthcare BV Practice Change in Response to the New Stark Regulations? September 7, 10:00 a.m.-11:40 a.m. PT/1:00 p.m.-2:40 p.m. ET. Featuring: Timothy R. Smith (TS Healthcare Consulting), Mark O. Dietrich, Don Barbo (VMG Health), and Greg Endicott (Strategic Value Group LLC). CPE credits: 2.0.

  Key thought leaders in healthcare business valuation discuss the ramifications of the recent update to the Stark regulations on business valuation practices.

• Valuation to Maximize Client Engagement and Value, September 13, 10:00 a.m.-11:40 a.m. PT/1:00 p.m.-2:40 p.m. ET. Featuring: Mikhail Munenzon (InteleK Business Valuation & Advisory) and Andrew Mackson (InteleK Business Valuation & Advisory). CPE credits: 2.0.

Learn how business valuation can offer tremendous value to practitioners and their clients when used proactively, setting the wheels in motion to take the right action, reduce various risks, and increase profit.

Holiday Break

BVWire will take a break for the Labor Day holiday next week. We will resume publication on September 13. Have a happy and safe holiday!