BVWire Issue #161-2 | February 10, 2016


Further reflections on New Jersey ‘bad behavior’ DLOM case

The issue of DLOM in fair value proceedings involving dissenting shareholder appraisals and oppressed minority shareholder buyouts is an issue of rising concern. Our reporting on the recent DLOM decision in the long-lasting Wisniewski v. Walsh case has fueled the fire.

BV nightmare: In his blog, Chris Mercer (Mercer Capital) says the DLOM rulings in the case reflect the trial court's preoccupation with equities rather than the economics of the business in play. He calls the case a “business appraiser’s nightmare.” Mercer writes:

If trial courts determine marketability discounts as bad behavior discounts, there really is no way that business appraisers can provide meaningful information to a court. If the court’s concern is one of “the equities” in a matter rather than in determining the fair value or the fair market value of a business or interest in a business, then there is little that appraisers can do to help. In Wisniewski, the application of a marketability discount flowed, not from the lack of marketability of the trucking business, but from the bad behavior of Norbert. Neither Trugman nor Grabowski had a chance in that determination. All we can say is that the court’s ultimate conclusion for the bad behavior (marketability) discount fell within the range of that suggested by Trugman (0%) and Grabowski (35%) and had nothing to do with the relative marketability of the business at hand.

What do you think about this? Join the BVR LinkedIn group—there’s a new discussion: “Bad Behavior DLOM in New Jersey.”

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Attorney calls for BV profession to clarify DLOM in fair value cases

A blog post by New York attorney Peter Mahler (Farrell Fritz) in the New York Business Divorce blog discusses an article in Business Valuation Update, ”NY’s Unfair Application of Shareholder-Level Marketability Discounts,” written by Gil Matthews (Sutter Securities). New York's out-of-step position is a hotly debated issue, and Mahler gives his perspective on the issue and says that it “would be nice if the business valuation community could speak with one, clear voice on the issue.” BVWire asked Mahler to elaborate.

Need a ‘right’ answer: “It’s important for lawyers to be able to advocate, and for judges to decide, whether both in theory and practice, it’s equitable to apply DLOM in fair value cases from both a legal and appraisal standpoint,” Mahler says. “Mercer [Chris Mercer of Mercer Capital] and others argue it’s never fair (in the sense of nondiscriminatory among shareholders of the same class), and that there exists no reliable empirical basis (pre-IPO and restricted stock studies included) to determine DLOM at the financial control level of value. Matthews also argues strongly that DLOM is never fair at the shareholder level but seems comfortable when DLOM is factored into the discount rate as in the Seagroatt case. [Shannon] Pratt writes in Chapter 1 of Business Valuation Discounts and Premiums (2nd ed. 2009) that ‘[c]ontrol shares in a privately held company may also be subject to some discount for lack of marketability, but usually not nearly as much as minority shares.’ Given these variations, I think we could use some additional clarity in articulating and supporting applicable appraisal doctrine and methodology in support of fairness-based legal arguments in order to get to the ‘right’ answer when it comes to DLOM in fair value cases.”

Can the BV profession respond?

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Early poll results: BV practice management is biggest concern

Preliminary results of our online survey in last week’s BVWire reveal that over a third (35%) of respondents say that practice management is their biggest concern for 2016. This includes competition, fee pressures, hiring, succession planning, and the like. The second most cited concern is keeping up with developments in the profession (e.g., new information, continuing education, etc.). A number of respondents checked the “other” category, and the most prevalent response is “growing my business,” but others say they have “too much work” (maybe they should get together!).

Join in: We’re going to keep the survey open for a while longer, so please weigh in with your thoughts! The survey takes less than a minute, so click here. Your responses can be anonymous if you wish. Our thanks to those who have already responded!

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Valuation in the limelight: Valuation reports surface on WikiLeaks

A number of valuation reports from the Big Four and large national BV firms are on WikiLeaks, points out an article in NACVA’s QuickRead. The author uses these reports to demonstrate USPAP’s concepts of hypothetical conditions and extraordinary assumptions. A WikiLeaks search of the term “valuation report pdf” triggers over 1,000 hits.

One of the valuation reports is for Sony Pictures for an equity stake in the Game Show Network (GSN), a channel showing reruns of classic game shows. Ernst & Young did the report (in draft form), which found the fair value of the total equity of GSN to be $640 million (in 2009). Interestingly, that’s exactly 10,000 times what you could win on the old “$64,000 Question” quiz show (consolation prize was a case of DUZ).

New valuation report database imminent:  This news bodes well for BVR’s 2016 initiative to launch a valuation report database for the BV profession and the masses. This new product, in development with input from the profession, will feature actual valuation reports which are searchable by industry, business size, and more. We want to hear from you. If you are interested in being part of this important project, please email us.

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FASB adds to research agenda; issues proposed ASUs

The FASB has added six topics to its research agenda: four financial reporting issues (pensions and other post-retirement employee benefit plans, intangible assets, distinguishing liabilities from equity, and financial performance reporting); consolidations; and inventory and costs of sales. It also has issued two proposed Accounting Standards Updates (ASUs) on financial reporting by employers related to defined benefit pension and other post-retirement benefit plans.

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Global BV news:

iiBV stresses education for 2016

The International Institute of Business Valuers (iiBV) will be “investing in education” this year, according to its Winter 2016 newsletter. Its initiatives include continuing to provide in-class sessions around the world (especially TAQEEM and NAVS), build CPE events in the form of webinars, move forward on the launch of an international designation, and respond to requests to help with education programs for SAC IVAS (Singapore) and CPA Australia.

To sign up to receive the iiBV newsletters, click here.

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Valuators can rub shoulders with M&A pros March 3

BVR partner Transaction Advisors is presenting its Chicago M&A Conference on March 3 at the University of Chicago Gleacher Center. This technical and hands-on event provides intermediaries, advisors, investors, owners, and executives perspective and practical insights on the latest strategies for evaluating and structuring corporate transactions. It will also cover trends in transaction valuations in the context of M&As. Take a look at the agenda here.

Discount offer: When you register, use special code BVRGuest at checkout for $100 off the registration price. This will be a great event for learning and networking. Can’t make it to Chicago? The conference will also be in San Francisco on May 12!

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Yeanoplos appointed to Arizona judicial review commission

The Arizona Supreme Court has appointed Kevin Yeanoplos (Brueggeman and Johnson Yeanoplos PC) to serve a four-year term as a public member of the Arizona Commission on Judicial Performance Review. The commission, comprised of members of the public, attorneys, and judges, is responsible for developing performance standards and thresholds and conducting performance of justices and judges who are merit selected and subject to retention elections.

Kevin has a distinguished 33-year career in valuation and has served as an expert witness and court-appointed neutral in state and federal courts. He’s an accomplished author and is a member of the editorial boards of BVR’s Business Valuation Update and the AICPA’s Journal of Accountancy.

BVR is very happy to congratulate Kevin on this great honor.

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BV movers . . .

People: Susan Miano was promoted to partner in the Forensic Accounting, Litigation Support, and Valuation Services Group at the New Jersey-based Friedman … In an effort to grow its business valuation advisory services practice, the New York City-based WeiserMazars LLP named Bruce Richman partner. He will be based out of the Chicago office.

Firms: CliftonLarsonAllen is adding the northeast Ohio firm Bruner Cox effective June 1. This comes on the heels of four mergers earlier this year … The Charleston, S.C., firms Jarrard, Nowell & Russell and Biddlecomb Game & Wise merged … O’Connor Davies has been rebranded as PKF O’Connor Davies as it takes on a new role as the lead North American firm in the PKF International network … Ouellette & Associates, based in Grand Falls, New Brunswick, Canada, has merged with Grant ThorntonPrairie Capital Advisors, a leading corporate advisory and investment banking firm, opened two new offices: a larger office in Chicago and a new office in Louisville, Ky. … The Malden, Mass., firm Rucci Bardaro & Falzone acquired Jensen Malley & Co., based in Waltham, on February 1 … The global advisory firm Stout Risius Ross was ranked as the “Top U.S. Fairness Opinion Advisor” for the past five years, based on the total number of deals reported in Thomson Reuters' Mergers & Acquisitions Review (2011-2015).

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CPE events for February

Alternative Energy—Understanding Critical Business Valuation Issues (February 11), with Rick Daubenspeck (BDO Consulting) and Donna Lobete (BDO Consulting).

Discount for Lack of Marketability for Any Restriction Period: Mastering the Average Strike-Put Option Model (February 16), with John Finnerty (Finnerty Economic Consulting LLC). This is Part 4 of BVR's Special Series on Discounts for Lack of Marketability.

Valuing Specialty Paving Contractors (February 18), with Brad Minor (Blue).

Stop Overvaluing Synergies: Master These Skills (February 23), with Jeff Litvak (FTI Consulting) and Brent Miller (FTI Consulting).

Important note to webinar attendees: To ensure that you receive your dial-in instructions to BVR’s training events, please make sure to whitelist

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

DLOM nightmare

One BV voice needed

BV practice woes

Sample valuation reports

FASB update

Global BV news

M&A and valuation

BV pro eyes Ariz. judges

BV movers

CPE events












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