Hitchner warns of the perils of plagiarism

The explosion of AI tools and content over the internet opens a wider door to plagiarism, and, even though it may be unintentional, it’s still a serious problem for valuation analysts, writes Jim Hitchner (Valuation Products and Services) in the November issue of Hardball with Hitchner. Experts can be discredited over material in a valuation report that is copied from outside sources without attribution, whether it’s inadvertent or not. He provides an example of expert witness testimony that shows how easy it is to get caught in a plagiarism trap.

How to detect it: Hitchner himself has been a victim of plagiarism, as his published works have been lifted over and over again, he writes, giving a number of examples. One good way to detect plagiarism in a valuation report is if you notice a change in the writing style. That’s a sign that something has been cut and pasted into the report. And all you need to do is Google the suspected text to check it. Also, he cited a “great source” on the topic: plagiarism.org.

During his annual update webinar earlier this year, Hitchner asked the audience: Have you ever seen plagiarism in business valuation? Half of the audience said they see it once in a while (40%) or often (9%). The rest said they have not seen it (44%) or it was not applicable (8%).

Best tip: Hitchner recounted that the best advice he received was from a publisher: “When you’re in doubt, footnote it.” That’s some advice he has never forgotten.

Business owner spouse stuck with agreed-upon valuation date

In a Pennsylvania divorce case, the wife was the 100% owner of a staffing business, but her husband ran it. In 2017, the couple separated, and, in 2019, the business fell into financial trouble, at which point the husband left the business. The wife sold 75% of her stake in 2019, so at issue during the divorce hearing (in 2023) was the value of her 25% share of the business. According to the wife, the couple agreed on a valuation date of 2019, but the specific date was not identified.

Frozen in time: After weighing the competing valuations from both sides, the court found that the wife’s 25% share of the business was worth $949,250. The wife appealed, arguing that a 2023 transaction in the company stock indicated that the value of her share was zero. But the appellate court declined to reverse the trial court, noting that the parties had agreed to a 2019 valuation date. The trial court did not “abuse its discretion” by not considering post-2019 evidence of value.

The case is Kidan v. Schneider, 2024 Pa. Super. Unpub. LEXIS 2666, and a case analysis and full court opinion are available on the BVLaw platform.

BV firm or practice revenue: Up from 2023?

That’s the topic of this month’s “Two-Minute Practice Builder” survey. Will the revenue from your valuation firm or practice for 2024 be more or less than last year? What’s your outlook for 2025? Please take just a few minutes to give us your observations—click here to take a fast survey. The survey deadline is December 27. Thanks for participating!

Need for third-party fund valuations expected to increase

During a recent media roundtable with Valuation Research Corp., senior managing director Chad Rucker talked about private-market secondary transactions, a hot topic and high-growth area. He pointed out that the need for third-party valuations and fairness opinions is expected to increase due to several factors:

• As more fund sponsors rely on general partner-led continuation fund transactions to drive distributions, there is a heightened potential for conflicts of interest. These transactions often involve transferring “winning” assets into new structures, which necessitates independent assessments to ensure fairness;​

• Limited partners are becoming more vigilant about making sure they are treated fairly. This includes requiring evidence, often through third-party verifications, that transaction terms are fair;

• Industry trade groups, such as the Institutional Limited Partners Association (ILPA), advocate for independent assessments of asset values and fairness opinions in transactions involving LPs to mitigate conflicts of interest.

• The private equity secondary market has been expanding rapidly, with increasing transaction volumes in LP- and GP-led deals. As the scale grows, the scrutiny over fairness and transparency is also intensifying, further driving the need for independent valuations; and

• The maturation of the private equity industry, coupled with higher interest rates and complex transaction structures, underlines the importance of fairness opinions to validate transactions tailored to specific contexts.

Overall, the growing reliance on independent valuations reflects the private equity industry’s efforts to build trust and maintain credibility amidst rising complexities and scrutiny.

Also participating in the VRC media roundtable was P.J. Patel, Charles Sapnas, John Czapala, and Parag Patel, who discussed a variety of topics. We’ll have more from the roundtable in future BVWire issues and Business Valuation Update.

We also note that VRC will be celebrating its 50th anniversary in 2025, and it has grown to a network of 1,500 valuation professionals, which includes 300 colleagues based in the U.S. The firm specializes in alternative asset valuations for portfolios with illiquid securities; Level 3 assets and other hard-to-value securities; complex securities; fairness and solvency opinions; financial reporting valuation analyses; and tax, compliance, and planning requirements. For the past 12 years, it has been named “Valuation Firm of the Year” by M&A Advisor’s Annual International M&A Awards.

Kroll report emphasizes the importance of streaming in sports

A recent report from Kroll examines the business of sports and, in particular, the success of the NFL, and emphasizes the importance of streaming. “The proliferation of streaming technology not only transforms the landscape of sports broadcasting and viewership but also offers an opportunity to solidify the NFL’s winning approach,” the report says. “This accelerating shift to streaming and its potential value creation emphasizes the urgency for other major U.S. leagues to reassess their strategies.”

There are a number of reasons why streaming is crucial to sports teams and leagues, the report points out, including:

• Expanded audience reach: Streaming platforms enable sports teams to reach larger, more diverse audiences nationally and internationally. The NFL’s move toward streaming is a key part of its strategy to solidify its dominant position in the sports market;

• Revenue growth: Streaming provides a scalable revenue model, often allowing leagues to negotiate lucrative deals with platforms. For example, Peacock achieved significant viewership and new subscribers by streaming NFL games. Similarly, MLS partnered exclusively with Apple for a 10-year, $2.5 billion streaming deal​;

• Adapting to changing media consumption: With the decline of traditional linear television and the rise of on-demand viewing, streaming caters to modern viewer preferences, enhancing engagement. Platforms like Amazon Prime and NBCU have increased their investments in sports streaming, recognizing its potential to attract more viewers;

• Innovation in distribution: Streaming allows for more flexible and experimental distribution strategies, such as exclusive game broadcasts and integration with subscription services. This has proven effective, as seen with services like Peacock and Amazon expanding their audience base during high-profile events​; and

• Competitive edge: By embracing streaming, leagues like the NFL set an example for other sports organizations. Streaming’s capacity for broader revenue-sharing models and global outreach represents an evolution in how sports content is monetized.

The full report, “NFL—Its Unique Strategy and Dominating Valuation Proposition,” covers other topics as well and is available if you click here.

AVW webcast features the Connelly case

Charles Persing (Bedersen LLP) appeared on the November edition of NACVA’s Around the Valuation World (AVW) webcast to discuss the Connelly case that came out this past June. This is the U.S. Supreme Court case involving company-owned life insurance (COLI) proceeds used to redeem a deceased shareholder’s stock. The court ruled that the proceeds should be included for purposes of valuing the corporation for estate tax purposes and the value should not be offset by the redemption liability.

What to do: Persing, who initially did not agree with the ruling but now concurs with it, advises valuation analysts to have a full understanding of a company’s buy-sell and redemption agreements. Also, analysts should consult with counsel as well as other members of the client’s advisory team to gauge the possible impact on the valuation and any estate issues. He noted that, had the owners followed the buy-sell terms, it’s possible that the IRS may not have flagged the matter in the first place. Also, alternative strategies should be assessed in light of this ruling.

A free recording of the AVW webcast is available if you click here (Persing’s segment starts at 1:29:15). These two-hour monthly webcasts are very well done and informative. They are available for CPE to subscribers, and they are posted on YouTube each month.

Extra: Roger Grabowski (Kroll) wrote a summary of the Connelly decision in the July issue of Business Valuation Update.

Auburn University takes first place in BV Challenge

Student teams from 15 schools participated in the BV Challenge competition sponsored by Georgia State University. A group of experienced valuation experts mentored and judged the teams. The team from Auburn University was awarded first place, followed by Baldwin Wallace University in second place and the University of Texas at Dallas taking third place. The top three teams will receive cash awards, and the first-place team receives the Kierulff Cup trophy, named for Professor Herbert Kierulff of Seattle Pacific University, who created the BV Challenge.

Business Valuation Resources was a sponsor of the event and provided complimentary data, resources, and other materials. Other sponsors included the American Society of Appraisers and John Borrowman of Borrowman Baker. For more information on the BV Challenge, click here.

Winners of the 2024 BV Challenge in Canada

At about the same time the U.S. was holding the BV Challenge (see the news item in this issue), the CBV Institute held its own competition for undergraduate students from top business schools across Canada. The competition saw 22 teams (85 students) test their business valuation skills, and here are the top three teams:

1. University of Toronto—St. George Campus: Muskaan Aggarwal, Sabrina Chio, Cedric Furman, and Caitlin Zhang;
2. Okanagan College: Connor Kindrat, Tyler Olsen, Jackson Price, and Natasha Savelieva; and
3. University of Waterloo: Daniella Djomga, Xavier Toney, Vanie Tran, and John Yung.

The top three teams received cash awards, and the members of the first-place team will receive complimentary enrollment to Level 1 in the CBV Program of Studies.

“I would like to take this opportunity to congratulate the members of the first-place team from the University of Toronto, along with those who placed second and third,” said Dr. Christine Sawchuk, president and CEO, CBV Institute. “With demand for CBVs at an all-time high, the BV Challenge is an excellent opportunity to introduce undergraduate business students to our rapidly expanding and evolving profession. We look forward to further growing this case competition in the coming years with the goal of exposing even more students to the dynamic and rewarding world of business valuation.”

More details on the competition are available if you click here.

BV movers . . .

People: Bailey Butler, CPA, has joined the Memphis office of HHM CPAs as a supervisor in the Management Advisory Services (MAS) department, where she will focus on business valuations, forensics, and litigation support services; she serves as an adjunct professor at Rhodes College and is a graduate of Mississippi State University … Alan Stelling, CPA, has joined Paradigm Forensics LLC in its Boston office’s forensic accounting and business valuation team as a supervisor; he has historically specialized in intangible asset valuations and purchase price allocation analyses.

Firms: Farmington Hills, Mich.-based UHY LLP has received private equity funding from Summit Partners, a Boston-based investment firm; the investment will support the continued expansion of UHY’s team, technology, and client service offerings while helping to accelerate both organic and acquisition-driven growth … Tucson, Ariz.-based BeachFleischman has expanded its cannabis practice by acquiring Indiva Advisors LLP of Las Vegas, an accounting firm dedicated to the cannabis industry, and it’s five team members; the firm’s cannabis client base now extends over 20 states … Brentwood, Tenn.-based LBMC has acquired Memphis, Tenn.-based Frazee Ivy Davis, an accounting and advisory firm that offers customized solutions in healthcare, manufacturing, logistics, hospitality, and real estate; the deal adds five shareholders for a total of 35 professionals, bringing LBMC to six locations and more than 900 team members in 30 states.

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

CPE events

Understanding DealStats: What You Need to Know (FREE WEBINAR), December 11, 10:00 a.m.-11:15 a.m. PT/1:00 p.m.-2:15 p.m. ET. Featuring: Adam Manson (Business Valuation Resources) and Oday Merhi (Business Valuation Resources). CPE credits: 1.5.

Are you aware of the newest enhancements to DealStats? The speakers will cover them and include a background on the resource, such as the data sources DealStats uses, how the data are reviewed and vetted, and what benefits the database can provide.

Ethical Issues in Business Valuation—December 2024, December 12, 10:00 a.m.-11:40 a.m. PT/1:00 p.m.-2:40 p.m. ET. Featuring: R. James Alerding (Alerding Consulting) and John Barrett Jr. (Barrett Valuation Services Inc.). CPE credits: 2.0.

The speakers will cover a broad range of ethical topics, from review of BV standards relating to ethics to examples of ethical issues in practice, as well as a section discussing ethical issues relating to artificial intelligence (AI).