Delay in divorce decree does not change valuation date

In a Montana divorce case, the husband became an owner of a business right before marriage. When the couple divorced, the business was valued at $2.2 million, which the wife did not contest at trial. The court took three years to issue the final divorce decree. In the meantime, the business catapulted in value, and the husband got an offer to sell the business for $24.5 million.

Do over? The wife argued that the valuation date should be the date of the final decree, not the date of trial. Of course, this would give her a share of the huge increase in value of the husband’s business. But the appellate court disagreed, finding that “unique circumstances” call for the valuation date to be the date of trial. The wife had cleared out of the family home right after the trial and moved to California, and she had no involvement with the business. Also, the husband should not be penalized because of the court’s three-year delay in issuing the final decree.

The case is In re Marriage of Remitz, 2023 MT 212N; 2023 Mont. LEXIS 1105, and a case analysis and full court opinion will be on the BVLaw platform.

Update on guidance regarding the company-specific risk premium

Expect to see an exposure draft of guidance on the company-specific risk premium during the first half of 2024, reported Christopher Armstrong (KPMG), at the winter edition of the ASA’s Fair Value Conference last week. He is part of the group developing the guidance, and there will be a public comment period, he noted.

Preview: The group has issued a brief (click here) that provides a summary outline of certain key areas that will be explored in greater detail in the upcoming guidance, such as specific procedures for assessing discount rates and prospective financial information (PFI), as well as identifying and quantifying the elements of a CSRP. The guidance, which is voluntary, will be in the form of a Valuation in Financial Reporting (VFR) Advisory from The Appraisal Foundation (TAF).

Ray Rath (Baker Tilly US LLP) was the conference chair, and other topics included the future revision of the Mandatory Performance Framework (from the now-sunset CEIV credential), discount rates and volatility for contingent consideration, fair value audits, and the latest on the AICPA business combinations guide. Beside Armstrong, speakers included Marianna Todorova (Kroll), Mark Smith (AICPA), Mark Zyla (Zyla Valuation Advisors), Gary Roland (Kroll), Mark Edwards (Grant Thornton), Amanda Miller (EY), and Vincent Covrig (Crowe LLP). More coverage will be in a future issue of Business Valuation Update.

Practice opportunity: Buy-sell agreements

A “vast opportunity” for appraisers can be found in buy-sell agreements, according to Jeff Tarbell (Houlihan Lokey) and Riley Busenlener (Chaffe & Associates Inc.), who is also an attorney. They conducted a session on buy-sell agreements at the 2023 American Society of Appraisers International Conference recently in New Orleans.

Poorly drafted (if at all): Many closely held companies do not have these agreements in place, which allow for transfers of interests when an owner exits the business due to some triggering event, such as retirement, death, divorce, and the like. And when they are in place, they are typically poorly drafted when it comes to addressing the value of the firm at a triggering event and the selection process for the appraiser. Opportunities exist for appraisers to help draft the valuation provisions in the agreements and when a valuation is needed in the future.

The speakers gave some basic background info on these agreements and their impacts on valuation, one obviously being that they impact marketability discounts to some extent. It’s important to be very specific about certain things, such as triggering events, which can be tricky (e.g., what constitutes a “disability”). The panel mentioned that they rarely see anything in buy-sells that talk about the qualifications of the appraiser to be chosen or any specific standards that need to be followed for the valuation. One idea they felt was a good one was that the buy-sell can use the “qualified appraisal” definition in the tax law’s Section 170 concerning charitable contributions.

Coverage of more sessions at the conference is in the December issue of Business Valuation Update.

Need to value a stadium seat license?

Often overlooked by estate professionals or dismissed as having no value, sports stadium seat licenses have an active public market that can be used as a starting point for a valuation, according to Jackson Crispin (Willamette Management Associates) in a recent article. For example, STR Marketplace offers fans the ability to sell or transfer seat licenses, and these markets frequently report transaction data. Not all sports teams allow their seat licenses to be sold in these marketplaces, and, even when they do, there are other valuation considerations, such as the location of the seats, outliers in the data (e.g., for a major rivalry game), transfer restrictions the teams impose that can trigger a marketability discount, and more, Crispin points out. The article appears in the October 2023 issue of Willamette’s Perspectives, which you can read if you click here.

Kroll releases Valuation Insights Q4 2023

In the Q4 2023 edition of Valuation Insights, Kroll experts provide a recap of current global economic and financial market conditions and discuss the implications of a higher cost of capital on valuations, M&A, and IPO markets in the fourth quarter of 2023 and 2024. There is also a look at SPACS (1H23 highlights) and market multiples for North American and European industries. To access the full issue, click here.

Preorder deal on the 2024 Business Reference Guide

The 2024 print edition of the Business Reference Guide (BRG) by Tom West is now available for preorder at a 20% savings if you click here (valid through December 31). Now in its 34th year, it 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 700 types of businesses. There is also an online version with a fully searchable database, and it includes the print version of the guide. The print edition will be available in February 2024.

‘Landmark’ update to IVS approved

Two years in the making, the International Valuation Standards Council (IVSC) has unanimously approved the forthcoming edition of the International Valuation Standards (IVS), set for release in January 2024. The “landmark” update represents a “significant evolution in the IVS,” the organization said in a statement. Some sections, particularly IVS 500—Financial Instruments and IVS 104—Data and Inputs, have been extensively updated. Also, the 2024 edition will feature improved navigation and integrated digital tools, “making it the most accessible and intuitive IVS to date.” When the new version is released, the IVSC will host a series of complimentary webinars on the changes.

BV movers . . .

People: Brent McDade, ASA, ABV, CVA, MAFF, has joined Willamette Management Associates as a director in the firm’s Atlanta office; he has nearly 30 years of experience in the areas of business valuation, economic damages, and investment banking and has performed valuations for the purpose of tax planning and compliance, forensic analysis and dispute resolution, financial reporting, and transaction planning … Two professionals have joined Houston-based Weaver: T.J. Liles-Tims, CVA, CFE, MAFF, has joined as a new managing director in its Forensics and Litigation and Valuation Services practices based in the firm’s Oklahoma City and Dallas offices and Liza Bowersox, ASA, has joined as a new managing director in the firm’s Valuation Services practice, and she is based in Richmond, Va., serving as a local market leader for valuation services on the East Coast.

Firms: Albuquerque, N.M.-based REDW has expanded into the Pacific Northwest by adding Grove Mueller & Swank of Salem, Ore., an accounting, tax, and consulting firm … Eide Bailly has acquired RBTK of San Diego, a firm that focuses on the construction industry … Naperville, Ill.-based Sikich has acquired Golden Trail Advisers, a wealth management consulting firm based in Burr Ridge, Ill. … Towson, Md.-based Rosen Sapperstein and Friedlander will acquire Mister, Burton & Associates of Hunt Valley, Md., which provides audit, tax, accounting, and management advisory services for businesses, business owners, and high-net-worth individuals … Birmingham, Ala.-based BMSS Advisors & CPAs will add Haddox Reid Eubank Betts of Ridgeland, Miss.; the combined firm will operate under the BMSS name and will have 32 partners, 125 CPAs, and approximately 322 employees.

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

CPE events

BVLaw Case Update, December 13, 10:00 a.m.-11:40 a.m. PT/1:00 p.m.-2:40 p.m. ET. Featuring: R. James Alerding, Alerding Consulting LLC; James D. Ewart, James D. Ewart LLC; and Andrew Z. Soshnick, Faegre Drinker Biddle & Reath LLP. CPE credits: 2.0.

Two veteran valuators and a family law attorney/valuation expert examine recent valuation and financial litigation decisions.

Trade Secret Damages, December 14, 10:00 a.m.-11:40 a.m. PT/1:00 p.m.-2:40 p.m. ET. Featuring: Richard F. Bero (The Bero Group) and Jason Stiehl (Crowell & Moring). CPE credits: 2.0.

A damages expert and an attorney discuss how expert analysis can help determine damages in trade secrets lawsuits.