BVR Logo December 22, 2021 | Issue #231-4

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

Updated NICE DLOM model available for
free download

During a recent BVR webinar, Will Frazier (Weaver) did a demo of the revised version of his nonmarketable investment company evaluation (NICE) method for estimating a discount for lack of marketability (DLOM). An Excel template for the revised version, aptly named NICE-R, was given to the audience along with a user’s guide—and they are now available on his website if you click here.

Court test: The year 2020 saw the first use of the NICE method in Tax Court, in Grieve v. Commissioner. The taxpayer brought in Frazier as the second valuation expert for trial, and his valuation was only slightly lower than that of the taxpayer’s original expert. The court accepted the valuation of the original expert and rejected the approach by the IRS valuation expert. While the court did not adopt the NICE approach, it was not critical of it. Neither was the IRS expert, who agreed that it was a “reasonable approach.”

The method is not designed for operating businesses. As its name implies, it is designed specifically for determining the fair market value of equity interests in closely held investment entities, such as family limited partnerships, S corporations, and limited liability companies. While NICE is referred to in the context of estimating a DLOM, it does not determine DLOM as a separate and distinct amount. Instead, it is an income-based method that embodies the DLOM as well as discounts for control and lack of liquidity in the discount rate and views them as investment risks.

Use of DCF for damages survives challenge

In an antitrust lawsuit in Nevada, the expert for a company that alleges it was forced to close due to anticompetitive practices used the discounted cash flow (DCF) method to calculate damages. The court granted a motion to strike the expert’s testimony on the grounds that the DCF was too speculative. Upon reconsideration, the court decided that the DCF was allowable in this case and, therefore, the testimony should be reinstated and presented to the jury for use in determining damages. In allowing the DCF, the court noted: “Relying on future lost profits does not eliminate the rule that a party may not recover both future lost profits and going-concern value.”

The case is V5 Techs., LLC v. Switch, Ltd., 2021 U.S. Dist. LEXIS 216426; 2021 WL 5237228. An analysis and full opinion are available on the BVLaw platform.

Damodaran on the CEO mismatch

Assessing management is a key part of the valuation analysis of a subject company. Interesting reading from the “dean of valuation”: Professor Aswath Damodaran (New York University Stern School of Business) talks about why he feels that traditional thinking about what makes a great CEO is flawed. “There is no one template that works for all companies,” he writes in a blog post, citing research from the Harvard Business School and McKinsey that leans to a “one-size-fits-all great CEO model.” For example, companies have life cycles, and they go through different stages—from startup to decline—and the CEO will need a different mindset for each stage.

Ask questions: For the valuation analyst, if, during the management interview, you get the impression that the CEO is a visionary, is that good or bad? If it’s an early-stage company, it may be a good fit because the CEO needs to think outside the box in terms of new ideas, markets, and ways to attract investors. But, if the company is in a mature stage, a visionary may not be a good fit—the mindset needs to be on maintaining market share, fending off competitors, and other tactics for “trench warfare.” The analyst’s questions should be geared toward ferreting out whether management is up to the task. If not, that may mean adjusting company-specific risk.

This phenomenon may be more noticeable in closely held companies or family-run firms where top management tends to stay entrenched as the company goes through the various stages of its life cycle.

Takeaways from an interview with Duff & Phelps

The International Valuation Standard Council (IVSC) recently interviewed David Larsen, Srividya Gopal, and James Gavin, managing directors at Duff & Phelps, A Kroll Business, about their perspectives on current issues facing the valuation profession. Here are some takeaways:

  • One result of the pandemic is that the importance of valuation has increased significantly, as has the need for experienced and qualified valuation professionals;
  • Over the past two decades, as capital deployed by the alternative asset industry has dramatically increased, the need to institutionalize valuation practices and processes has expanded;
  • Great strides have been made to align global valuation standards, such as U.S. GAAP and the International Financial Reporting Standards (IFRS), which have unified most requirements as it relates to, for example, fair value measurements and business combinations;
  • More work is needed to find a reliable and consistent measure of the impact of environmental, social, and governance (ESG) initiatives; and
  • From a corporate boardroom perspective, there is certainly a lot more awareness of the need for independent valuations or fairness opinions.

You can read the full interview if you click here. It was also mentioned that the Duff & Phelps brand will transition fully to Kroll by the end of 2021.

Reminder: 20% off the 2022 Business Reference Guide expires December 31

The 2022 edition of the Business Reference Guide (BRG) by Tom West is now available for preorder at a 20% savings if you click here. The discount offer expires December 31. Now in its 32nd year, the guide contains the latest industry-related information including “rules of thumb,” pricing tips, benchmarking information with comparison data, industry resources, and general industry data on nearly 600 types of businesses. There is also an online version with a fully searchable database, and it includes the print version of the guide.

CFA Institute debuts Kroll’s global cost of capital summary edition

The CFA Institute Research Foundation has put out the first edition of the “International Guide to Cost of Capital (IGCC) Summary Edition” from Duff and Phelps/Kroll. This 173-page work is an abridged version of the research and data that are available on the D&P/Kroll website and is the result of a new long-term partnership between the foundation and D&P/Kroll for the annual publication of the IGCC. The publication examines the important difference in risk characteristics of investing in various countries and has the following seven chapters:

  1. “International Cost of Capital Overview”;
  2. “Strengths and Weaknesses of Commonly Used Models”;
  3. “International Equity Risk Premia”;
  4. “Country Yield Spread Model”;
  5. “Relative Volatility Model”;
  6. “Erb-Harvey-Viskanta Country Credit Rating Mode”; and
  7. “Firm Size and the Cost of Equity Capital in Europe.”

The publication is free of charge, and you can download it if you click here.

Free webinars as lead-in to IVC conference

The first in a series of free webinars leading up to the International Valuation Conference (IVC) has been posted, and you can watch it if you click here. The discussion focused on upcoming changes in valuation standards and practice, and the panelists include Mark Zyla (Zyla Valuation Advisors), Paakow E. Winful (TAQEEM), and Johnnie White (ASA). The IVC conference is scheduled for 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.

BV movers . . .

People: Several appointments at Duff & Phelps/Kroll in its Valuation Advisory Services area: Michael Dolan has been appointed president, taking over for Paul Barnes, who becomes vice chairman, and Michael Weaver has been appointed head of international operations … Larry G. Autrey, CPA, ABV, managing partner at Fort Worth, Texas-based Whitley Penn, has been named to D CEO’s “Dallas 500 List”; he has more than 30 years of tax, advisory, and business valuation experience focused on public and private clients, and his areas of practice include mergers and acquisitions, manufacturing, distribution, profit enhancement, professional services, business valuations, and estate planning … The CBV Institute, Canada’s valuation professional organization (VPO), presents the George Ovens award to Membership Qualification Examination (MQE) candidates who achieve the highest marks. The 2021 recipients are: highest mark on MQE (tie): Janece Boersma, CPA CBV (Davis Martindale LLP), and John Drake, CPA CBV (Royal Bank of Canada); second highest marks: Eric Boehm, CPA CBV (BDO Canada LLP); third highest marks (tie): Claire Neale, CFA CBV (MNP LLP), and Michael Zelma, CPA CBV (BDO Canada LLP).

Firms: Great Bend, Kan.-based Adams Brown is adding Kane Mitchell and Co. LLC (KMC) of Overland Park, Kan., a firm that serves closely held and family-owned businesses, trusts, and individuals in a wide array of industries, including overlap areas such as construction and professional services companies … Lancaster, Pa.-based RKL LLP continues to expand its footprint in Pennsylvania, adding Chambersburg, Pa.-based Rotz & Stonesifer PC, a firm that provides accounting, personal, and business tax; trusts and estates; and financial planning services to closely held companies and high-net-worth individuals … Growing its affordable housing and manufacturing practice, Atlanta-based Aprio LLP is adding Henderson & Godbee LLP of Valdosta, Ga., which has 35 team members, including four partners.

Please send your professional and firm news to us at

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.


Holiday Break

After taking time off for the holidays, BVWire will be back on Wednesday, Jan. 12, 2022. We wish you a safe and happy holiday season!

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


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