BVWire Issue #195-2  | December 12, 2018


Free trial expires soon for new cost of capital platform

Have you had a chance to test drive BVR’s Cost of Capital Professional (CCPro)? The free trial period ends December 31 for the new, independent alternative for estimating the cost of equity. This is an online platform that empowers the expert with the freedom to use professional judgment and common sense in developing one or more cost of equity estimates using the build-up method and CAPM. Users are not steered toward outputs from a “black box” of complex mathematics. The platform’s data are from CRSP, Professor Aswath Damodaran’s resources, and the U.S. Federal Reserve on Treasury bond yields. In addition to its simplicity and transparency, it’s affordable to all—not just the big firms. The annual price is $295 for the first user and $100 for each additional user. There’s a special offer of 14 months for the price of 12 if you subscribe now.

Faster data: Users will be among the first to access year-end 2018 data when they are released in late January. This is up to a month sooner than other data sources. Check out a demo and free webinar that explains the thinking behind the platform. BVR welcomes feedback and comments from all users.

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AICPA collaborative divorce discussion signals career option for financial experts

Valuators working on divorce cases often say they like the work but hate litigation and the adversarial approach. A two-part panel discussion on collaborative law at the recent AICPA conference in Atlanta offered financial experts a vision of how they can stay in the game and enjoy it.

Collaborative law is a legal process in which couples who seek a divorce work with a team of professionals, including a lawyer for each spouse, a mental health professional (facilitator), and a neutral financial professional (NFP) to resolve their dispute outside the court system. This approach is based on transparency, and financial and personal issues remain confidential. Because information sharing is key, a collaborative divorce often ends up costing less than a litigated divorce.

The financial expert on the panel, Paul Garcia (Paul A. Garcia PA), who has served as expert in collaborative divorces and litigation settings, says the neutral financial professional plays a vital role in keeping costs under control. There are no court directives. Instead, the NFP, based on the spouses’ wishes, defines the scope of discovery, sets the valuation date, and develops a financial picture based on a limited financial review. The NFP’s financial assessment serves as a road map for developing different settlement options.

Explaining valuation concepts and developing calculations of value are key responsibilities, particularly when the contested assets include a business (or businesses). Typical valuation issues are goodwill, the value of the owner spouse’s services to the business, underreported or unreported income, and personal expenses charged to the business.

Garcia notes that, in many divorces, financial issues represent a major pressure point. But, by working with the parties on clarifying the spouses’ financial picture, the NFP can help alleviate some of the strain. Garcia has observed that often one spouse has less financial knowledge than the other spouse. The NFP can help educate the financially less savvy spouse as to basic financial and budgetary concepts. Watching clients develop more confidence in financial matters makes for great job satisfaction, Garcia says.

A more detailed account on this topic will appear in the January 2019 Business Valuation Update.

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2018 Thomas Burrage Award recipients named

While the late Thomas Burrage was highly respected for his expertise in litigation, forensic accounting, business valuation, and taxation, he is remembered most as a kind and generous man who gave back to the profession. In that spirit, the 2018 Burrage Award for Compassion, Collegiality and Character has been bestowed upon Kevin Yeanoplos (Brueggeman and Johnson Yeanoplos PC). The award was given by the Expert Resource Connection, co-founded by Burrage, which is a group of business valuation and forensic accounting professionals who share resources and collaborate on engagements. As part of the award, a scholarship stipend has been presented to Cassandra Mikolajczak, an accounting student at the University of New Mexico. Burrage was also known for giving his support and guidance to young people in the profession, and UNM was his alma mater.

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RSM issues white paper on AICPA PE/VC draft guide

A white paper prepared by RSM on the AICPA’s working draft of its PE/VC guide provides summaries of key provisions affecting middle-market entities. The guide itself (almost 650 pages) spells out best practices for the accounting and valuation of fund investments in portfolio companies with a focus on fair value for financial reporting purposes. The working draft was issued in May 2018, and the comment period closed in August. A final version is expected in spring 2019.

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Thinking of doing complex financial valuations?

Want to move from standard business appraisals to valuations of derivatives, guarantees, exotics, complex securities, and the like? You’ll need a strong background in economics and mathematics, advises Gary Schurman of Applied Business Economics, who recently conducted a BVR webinar, Portfolio Equations and Applications in Valuation. His firm specializes in financial valuation, capital markets advisory, and analytics.

Take this quiz: If you think you can tackle these engagements, first try answering the following questions. These are questions that a competent appraiser within this niche should be able to answer quite easily, and they may be posed by a client trying to see whether you know what you’re doing:

  • What is discrete time and continuous time and how do they differ?
  • How does standard calculus differ from stochastic calculus?
  • What are risk-neutral probabilities and how do they differ from actual probabilities?
  • Explain the Black-Scholes PDE (Partial Differential Equation).
  • Explain bond duration and convexity and the relevant Taylor Series Expansion.
  • Explain numerical integration and under what circumstances it is used.
  • Under what conditions can a square matrix not be inverted?

To check your answers, you can email Gary at Good luck!

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Small biz maintains optimism

The MetLife and U.S. Chamber of Commerce Small Business Index recorded an overall score of 69.3, indicating a pause in the upward trend of the Index. The fourth-quarter score is down less than one-half a point from the third quarter’s record high of 69.7 but still reflects general optimism from the small-business community. The Q4 2018 index is based on survey results of 1,000 small-business owners.

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Gender-specific risk?

Despite an overall sense of optimism at small businesses, those owned by women are facing more growth challenges than male-owned firms. Citing data from the latest Private Capital Access Index (PCA Index) from Dun & Bradstreet and Pepperdine Graziadio Business School, an article from points out that 57% of women-owned small businesses say that the current business financing environment is hindering their growth, compared to 42% of all surveyed small and midsized businesses. Women-owned firms are also having more trouble hiring employees. Similarly, 24% of women-owned small businesses reported that additional federal interest rate hikes would restrict their growth (compared to 21% of all small and midsized companies surveyed), and 15% believe it would inhibit their ability to raise capital (versus 11% of all small and midsized businesses). “Given the current climate of bringing awareness to the equality issues women have faced, it’s not surprising to see that women-owned small businesses are facing challenges beyond what their male-owned counterparts are reporting,” says Nalanda Matia, lead economist at Dun & Bradstreet, who is quoted in the article.

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Global BV News

Chair named for financial instruments board

Gavin Francis, group chief accounting officer at HSBC, has been appointed chair of a new board tasked with advancing global standards for financial instrument valuation. The Financial Instruments Valuation Standards Board brings together valuation leaders from across the financial world to develop common protocols that will underpin valuation in this burgeoning and international asset class. The board is part of the International Valuation Standards Council (IVSC) and includes representatives of international banks, prudential regulators, and valuation and accounting firms. The board will begin work to develop international standards in early 2019, says the IVSC in an announcement.

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Industry multiples in India

Duff & Phelps’ fifth edition of its “Industry Multiples India” report for the quarter ended September 2018 provides a detailed overview of the market multiples of companies in 22 major industries in the S&P BSE 500 Index. P/E multiples for most of the industries in India analyzed declined from June 30, 2018, to Sept. 30, 2018, demonstrating market correction in the quarter, the report says. Apparel, media, real estate, and independent energy and renewable electricity industries witnessed a significant decline in P/E multiples as compared to other industries. Multiples in IT services and infrastructure, IT software, and the pharmaceuticals and biotechnology sector increased due to weakening of the rupee and multiple strategic deals in the pharmaceuticals industry.

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BV movers . . .

People: At Rea & Associates, Mary Beth Koester, CVA, has been promoted to income principal and Chris Brinich has joined the firm as a senior business valuation analyst; both are in the firm’s Dublin, Ohio, office … Anthony Phillips, practice lead of the Tampa Bay Forensic & Financial Services Department of CBIZ MHM LLC, has been accepted into the Forensic & Business Valuation Division of the American Academy of Matrimonial Lawyers FoundationLeone, McDonnell & Roberts (Dover, N.H.) announced that one of its interns, Brooke Wells, along with her teammates from Plymouth State University, placed in the top eight nationally in the 2018 Sixth Annual Business Valuation Challenge sponsored by Georgia State University.

Firms: Hutchinson and Bloodgood LLP (San Diego) has acquired the practice of David Wood, CPA Kernutt Stokes LLP, a Eugene, Ore.-based accounting and business consulting firm, has expanded its business in the state with the acquisition of Spectrum CPA Group LLP; the combined firm now totals 89 employees in four Oregon locations … La Crosse, Wis.-based Hawkins Ash CPAs expands its presence into southeastern Wisconsin by joining forces with the Mequon office of Anderson, Tackman & Co. PLC; the firm now has 18 partners and over 130 professionals … Santa Rosa, Calif.-based Pisenti & Brinker LLP will combine with Zainer Rinehart Clarke, also in Sonoma County, under the Pisenti & Brinker name, effective Jan. 1, 2019 … Naperville, Ill.-based Sikich has acquired Knutte & Associates, a Darien, Ill.-based audit, accounting, and tax firm, effective Jan. 1, 2019 … Birmingham, Ala.-based Barfield Murphy Shank & Smith will merge with Hall Albright Garrison & Barnes of Huntsville, Ala., on Jan. 1, 2019; the combined entity (BMSS LLC) will have 29 partners, 94 CPAs, and approximately 225 employees … Yancey & Bowman LLC, a firm based in Harrisonburg, Va., has joined Brown, Edwards & Co. LLP, based in Roanoke, Va., effective December 1; the deal adds two partners and five associates to Brown Edwards’ existing office in Harrisonburg … Appleton, Wis.-based Schenck SC will join with CliftonLarsonAllen effective Jan. 1, 2019; in the meantime, Schenck will sell its stake in Taureau Group LLC, a provider of merger and acquisition services to privately held, middle-market companies … Salmon Barton & Associates of Atlanta has been merged into two firms: Lew Salmon and his staff are joining Dublin, Ga.-based TJS Deemer Dana LLP, and Rela Barton and her staff are joining Vann Whipple Milligan PC of Atlanta … Keiter (Glen Allen, Va.) will form an affiliate, Keiter Advisors, that will focus on mergers and acquisitions for lower middle-market companies with revenues between $20 million and $200 million … Chicago-based Crowe will acquire Asset Optimization Group (AOG) from Hylant Group; AOG is a healthcare technology and consulting firm … Baker Tilly Virchow Krause LLP is refreshing its brand identity and will be known as Baker Tilly with the slogan “Now, for tomorrow.”

Please send your professional and firm news to us at

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CPE events

  • Cost of Capital in Healthcare (December 13), with Matthew Warren (PYA) and Katherine Morris (PYA). Part of BVR’s Special Series presented by the BVR/AHLA Guide to Healthcare Industry Finance and Valuation.

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

CCPro trial

Practice op

Burrage Award

PE/VC paper

Skills quiz

Small biz outlook

Gender risk?

Global news

BV movers . . .

CPE events

LinkedIn discussions



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