BVR Logo December 15, 2021 | Issue #231-3

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



BV luminaries celebrate Festivus

What are the bugaboos of leading BV practitioners? For Roger Grabowski (Duff & Phelps/Kroll), it’s errors he sees in estimating long-term growth rates—he contends that analysts should not be using long-term real GDP growth plus expected inflation. For Chris Mercer (Mercer Capital), it’s analysts who cling to the myth that the “typical” range of restricted stock discounts is from about 25% to 45%, with an average of about 35%. For Jay E. Fishman (Financial Research Associates), it’s valuation experts who fail to realize their limitations and do not reach out for specialized help. These three luminaries also tackled some “grievances” from the audience in a lighthearted Festivus-themed Power Panel webinar (a recording will be available shortly). Unfortunately, there was no time for the final Festivus tradition—the Feats of Strength. Maybe next time!

New toolkit in development for active/passive appreciation

During a BVR webinar, Ashok Abbott (West Virginia University) discussed his recent peer-reviewed paper that explains his methodology for separating active from passive appreciation of business assets in a divorce context. His methodology involves identifying significant economic environmental factors (market forces) in an industry and measuring their relative contribution to growth in revenues, which requires statistical analysis. An audience member made the comment: “BVR should develop an automated solution for this.” A good idea! So BVR and Dr. Abbott are developing such a solution that will include a calculator, economic data (on a national level), and a user’s guide. The guide will include a plain-language explanation of the methodology, which will help the user explain it to the client or trier of fact (a major challenge when using a model of this type). A beta version is expected during the first quarter of 2022, so stay tuned!

The Nelson Tax Court case ‘has it all’

An appellate court recently affirmed the Nelson Tax Court case, which “has it all” in terms of valuation issues, said Barry Sziklay (Friedman LLP) in his session at the New Jersey CPA Society’s Business Valuation and Litigation Services Conference. The issues in the case include:

  • Do the cost, income, and market approaches produce a control versus a minority level of value?
  • Are so-called guideline companies and closed-end funds truly comparable to the subject company?
  • Are restricted stock and pre-IPO studies useful to determine a DLOM?
  • Is the Mergerstat Review useful to determine a DLOC?
  • What is the relationship between tiered entities with regard to valuation discounts?

The case is Nelson v. Commissioner, T.C. Memo 2020-81, which an appellate court recently affirmed. An analysis and full opinion of both the original case and appellate court case are available on the BVLaw platform.

Memories and condolences for Shannon Pratt

Postings have started to appear on the obituary page for Shannon Pratt, who passed away November 26 at age 88. We’ve included some tributes in a past issue, and a few more are in the January issue of Business Valuation Update. There will be a Celebration of Life on Jan. 6, 2022, at 1:00 p.m. at Valley Community Presbyterian Church, 8060 SW Brentwood St., Portland, OR 97225.

Extra: NACVA has a web page that includes some wonderful tributes.

Pandemic’s boost to gaming industry margins may linger

When we attended the ASA conference in Las Vegas in October, one thing we noticed was that the level of service in the hotel/casino was not what it once was. Staffing levels were way down, but this not only impacted customer service, but it also improved margins. During a recent BVR webinar on the gaming industry, Joe Tinucci, a Colorado CPA who is a consultant to Maverick Gaming, said that, this past June, staffing at their three properties in Colorado was down about 50%—but they found that they were generating more gross gaming revenue. Vegas has seen a similar phenomenon, and it’s been great for margins, according to Jack Behrens (Dreamscape COS). Will this continue? Of course, when staffing levels rise, there will be margin compression. But the industry has learned that it can do more with less and customers have come to expect less, so the margin improvement (or at least some of it) may be here to stay.

Impairments triggered by climate change

For the first time in a securities filing, Exxon Mobil Corp said that some of its oil and gas properties may face impairment due to climate change, according to a report in Reuters.

Now that we’ve hit year-end, companies will be examining whether there have been any triggering events over the course of the year, which could signal a need for asset impairment testing. Triggering events can include a number of different happenings, including adverse changes in legal factors, regulation, or business environment. It would not be a stretch to expect other oil and energy companies to experience triggering events related to climate change similar to what Exxon Mobil believes it may see.

ASA moves into new digs

The American Society of Appraisers has moved its headquarters office to a new location a short distance from its previous address. Check it out—here are some photos and a video. As you can see, the ASA will now be able to host educational courses, some events, and leadership meetings at the HQ instead of incurring the expense of outside locations and venues. The new address is: 2121 Cooperative Way, Suite 210, Herndon, VA 20171.

Date set for international valuation conference in Riyadh

The 12th International Valuation Conference will be held Oct. 3-5, 2022, in Riyadh, Saudi Arabia. The theme will be “The Future of the Profession,” and the agenda (not yet finalized) will include topical roundtable discussions, multidiscipline workshops, and training sessions. This conference is held every two years and is supported by the IVSC, ASA, China Appraisal Society, and many other national and international valuation organizations.

Preview of the January 2022 issue of Business Valuation Update

Here’s what you’ll see:

  • BV Year in Review 2021: End of an Era” (BVR Editor). A recap of significant new ideas and developments as reported in over 70 articles and hundreds of news items in the pages of Business Valuation Update during 2021.
  • BVLaw Review: The Top Valuation Cases of 2021” (BVR Editor). Here is our pick for the state and federal court decisions that enhanced our understanding of valuation issues as they arose in a litigation setting during 2021.
  • Final Version of Global Business Valuation Glossary Released” (BVR Editor). The International Valuation Glossary—Business Valuation has been completed, and a final version has been released. The prior glossary (from 2001) needed an update because new terms have gained traction and become more popular in the market and in practice.
  • Vertical IQ Enhances Its Industry Research Platform” (BVR Editor). Audience Q&As from a webinar on the Vertical IQ industry research platform. The addition of behind-the-paywall industry news from LexisNexis will enhance the platform’s industry news feature.

The issue also includes:

  • A full section of “BV News and Trends/Global BV News and Trends”;
  • Regular features: “Ask the Experts” and “Tip of the Month”;
  • BV data spotlight: “DealStats MVIC/EBITDA Trends,” “FactSet Mergerstat/BVR Control Premium Study,” “Economic Outlook for the Month,” and the “Cost of Capital Center”; and
  • BVLaw Case Update: The latest court cases that involve business valuation issues.

To stay current on business valuation, check out the January 2022 issue of Business Valuation Update.

BV movers . . .

People: Robert “Bob” Morrison, FASA, BV/IA, former firm leader of Rosenfield and Co. PLLC’s Business Advisory Services Team will effectively be retiring as of December 30 and serving as counsel to the firm; replacing Bob as firm leader is newly appointed Paul Dumm, CPA, ABV, CFF, CFE, ASABrad W. Matthews, CPA/ABV, CVA, has been promoted to senior manager in the Business Valuation Services Group at Grossman Yanak & Ford LLP in Pittsburgh; he performs business valuations for gift and estate tax planning, ESOPs, marital dissolutions, shareholder disputes, financial and tax reporting, buy/sell transactions, and general business planning; his litigation support expertise includes financial forensic analysis and the determination of lost profits and economic damages arising from disputes … Sasha M. Moore, CPA/ABV, CFE, has been chosen to participate in the Florida Institute of Certified Public Accountants’ Leadership Academy, a selective, high-impact program for CPAs age 35 and under who are looking to grow as leaders; she is a senior analyst in the Forensic Consulting Group at CBIZ Inc., specializing in complex litigation and business valuation; she is one of 15 CPAs who will comprise the academy’s inaugural class.

Firms: Calgary-based MNP is adding Eric Duguay CPA of Gaspé, Quebec, a firm that provides a wide range of accounting, tax, and advisory services to private enterprise companies in diverse industries throughout the Gaspésie region … Chicago-based Crowe LLP expands its presence in Texas by adding Houston-based Briggs & Veselka, which provides audit, tax, and a variety of consulting services across Texas and nationally for numerous industries … BST & Co. of Albany, N.Y., has formed a new wealth management division, Affinity BST Advisors, for individuals and businesses, private investments, and trust and estate planning … New York City-based PKF O’Connor Davies will add LB Goodman & Co., a firm based in Fair Lawn, N.J., effective Jan. 1, 2022; PKF also recently added DGC LLP (formerly DiCicco, Gulman & Co.), an accounting, tax, and advisory firm based in Boston.

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

CPE events

Practical advice is given on what to do when there is a large chasm between your valuation and the one from the opposing spouse’s expert.

Even the most seasoned expert can have a tough time coming up with—and defending—a value for diagnostic imaging centers because of the complex nature of the business.





We welcome your feedback and comments. Contact Andy Dzamba (Executive Editor) at: info@bvresources.com.

 


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