BVR Logo February 3, 2021 | Issue #221-1

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

Indiana Supreme Court issues key ruling on discounts in compelled buybacks

Last year, in a compelled buyout, the Court of Appeals sided with the departing minority shareholder when it found discounts did not apply in a closed-market sale. In a freshly minted decision, the Indiana Supreme Court reversed the Court of Appeals, finding there was no blanket rule disallowing discounts in a compelled buyback. This is especially true where the parties exercised a shareholder agreement whose terms suggested the use of fair market value.

Compelled buyback: The plaintiff was one of the founders of the company and held a minority interest in it. In 2018, he was terminated without cause. Earlier, all shareholders made an agreement that specified how the buyback price of a terminated shareholder’s interest would be determined. The company would buy the interest at “appraised market value,” as determined by an independent valuator and in accordance with generally accepted accounting principles. The independent valuator applied discounts for lack of control and marketability.

The plaintiff asked the trial court for a declaration that discounts are inapplicable because the shareholder agreement here did not “contemplate a fair market value standard.” Ruling on the parties’ motions for summary judgment, the trial court essentially found that the term “market value” as used in the agreement was synonymous with fair market value. According to the trial court, the word “appraised” was an adjective modifying “market value.”

The Court of Appeals reversed, finding, under controlling case law, discounts were inappropriate because the transaction involved a compulsory sale. The company petitioned for transfer to the state Supreme Court.

Parties’ freedom to contract: The opening paragraphs in the Supreme Court opinion make the court’s preference for the company’s arguments clear. The court said, notwithstanding policy concerns that may preclude the use of discounts in certain circumstances, “we hold that the parties’ freedom to contract may permit these discounts, even for shares in a closed-market transaction.” The court went on to say, that, “under the plain language of this shareholder agreement—which calls for the ‘appraised market value’ of the shares—the discounts apply.”

The court said prior case law dealing with a statutory buyout “doesn’t control” in a situation such as here, “where the valuation term comes not from a statute but from a contract that contemplates the shares’ ‘appraised market value,’ not their ‘fair value.’”

The agreement’s plain and unambiguous language shows the parties to it agreed to value their shares as if they were sold on the open market, the Supreme Court said. Further, even if “the valuation term were somehow ambiguous,” the court would still find that “fair market value” was the appropriate standard.

A digest of Hartman v. BigInch Fabricators & Construction Holding Co., Inc., Indiana Supreme Court, case no. 20S-PL-618 (Jan. 28, 2021) (Hartman II), and the court’s opinion will soon be available at BVLaw. A digest of the Court of Appeals opinion in Hartman v. BigInch Fabricators & Construction Holding Co., Inc., 2020 Ind. App. LEXIS 183 (May 5, 2020), and the court’s opinion, are now available to BVLaw subscribers.

Many thanks to attorney Drew Soshnick (Faegre Drinker Biddle & Reath LLP) for alerting us to this important decision.

Free Excel models on valuing complex debt

During a recent BVR webinar, several case studies were presented on valuing complex debt instruments. The presenters offered to the audience an Excel file that contained the models used for the three case studies: (1) simple convertible debt using the DCF/yield method for the debt component and the Black-Scholes model for the option component; (2) convertible debt using a lattice model approach; and (3) valuation of warrants. If you would like a copy of the Excel file, send an email to with the words “Excel for complex debt” in the subject line, and we will be happy to get it to you. Ideally, you should listen to the case studies that the models relate to, and you can access a recording of the webinar if you click here (free to BVR Training Passport Pro holders; otherwise, it must be purchased). The webinar, Navigation Through the Maze in Complex Debt Instruments Valuation, was presented by Mark Zyla (Zyla Valuation Advisors), Rajesh C. Khairajani (KNAV), and Faisal Lakhani (KNAV).

Fiat Chrysler brand portfolio valued using 1% royalty rate

The portfolio of Fiat Chrysler brands is worth EUR 10.4 billion based on a preliminary valuation using an 1% average royalty rate, according to a white paper from MARKABLES. PSA Peugeot recently acquired Fiat Chrysler Automobiles, and its assets were valued in a purchase price allocation. The white paper notes that the valuation (which is still preliminary) makes Fiat Chrysler the 12th most expensive brand portfolio ever changing hands in an acquisition. The brands include Fiat, Chrysler, Dodge, Jeep, Ram, Alfa Romeo, Lancia, Abarth, Maserati, and SRT. The 1% average royalty rate “is in line with the royalty rate applied in 2011 when Fiat took over Chrysler,” the MARKABLES paper says. “The royalty rate might seem surprisingly low, considering the awareness and reputation of famous passenger car brands. However, it reflects weak profitability in the consumer vehicles sector, overcapacities, technological changes and environmental issues.” MARKABLES is a provider of data designed to support the valuation of IP assets. You can download the full white paper if you click here.

YE2020 data are now in the Cost of
Capital Professional

Year-end 2020 data, including equity risk premia, CRSP decile size premia, and industry betas/IRPs, are now available in BVR’s Cost of Capital Professional platform. The platform is a simple, transparent, and cost-effective service for estimating the cost of capital and is designed to bring more professional judgment and common sense back into the process, which has become too much of a complex “black box” of applied mathematics. It supports the buildup method and CAPM calculations for any valuation date. It also gives you the flexibility to choose the start year for historical return data based on what segment of history you believe best offers a reasonable basis to make estimates of expected future returns. For a personalized demo of the platform, click here.

Reminder: Comments due on 2022-23 USPAP

The fourth exposure draft of proposed changes to the 2022-23 edition of USPAP is available for review, and the Appraisal Standards Board is accepting public comments. You can submit comments and access the exposure draft if you click here. Comments are due by February 17.

BVR to webcast Energy Valuation
Conference May 12

For the third year, BVR is pleased to partner with the Houston Chapter of the American Society of Appraisers (ASA) to present a live webcast of the Energy Valuation Conference on May 12. The conference, which is in its 11th year, will feature presentations from nationally recognized speakers who are profession leaders, covering a range of important topics in the industry, including a post-COVID-19 outlook. Early-bird pricing is available through March 31. For more information and to register, click here.

KPMG on business valuations and ESG

While environmental, social, and governance (ESG) factors are seeing a “remarkable increase in awareness,” there is no “common approach regarding how to systematically factor ESG into financial valuations of specific target businesses,” says KPMG’s Quarterly Brief—International Valuation Newsletter for the first quarter of 2021. The KPMG brief suggests an approach to viewing business valuation through an “ESG lens” that involves assessing the ESG impact on cash flows and the discount rate and using probability-weighted scenarios. The brief also contains an update on recent capital market data, including major stock market performances, valuation multiples, current risk-free rates for major currencies, and country risk premiums. The full brief is available if you click here.

BV movers . . .

People: Lori A. Roth, CPA/ABV, CFF, has been named co-managing partner at New York-based Prager Metis CPAs; in her new role, she will provide leadership and strategic planning to more than 100 partners and principals and 600 team members … John Ferro, CPA, ABV, CEIV, CVA, has been hired as a managing director in the business valuation group at UHY Advisors; he will be based in the New York City office; his work focuses on valuation services, financial and tax reporting, and support for transactions and M&A, as well as company restructurings, reorganizations, and litigation … Saam Bandari, CPA, CA, CBV, CFA, has been named director of education and accreditation for the CBV Institute, Canada’s valuation professional organization; he has worked in valuation for both public practice and industry.

Firms: Ridgeland, Miss.-based Matthews Cutrer and Lindsay (MCL) is adding Lefoldt & Co., also of Ridgeland; MCL recently added Montgomery & Associates (Jackson, Miss.), so these deals add 11 shareholders and about 50 professionals operating in four offices in Ridgeland, Clinton, and Yazoo City, Miss. Sacramento-based MGO LLP is adding Hall & Co. (Irvine, Calif.); the deal creates a team of more than 90 professionals serving clients in Orange County … Five accounting firms in central Arkansas have merged to form a new firm, Garland & Greenwood; the new firm has about 30 employees and 17 CPAs that provide a wide range of financial and accounting services from offices in Little Rock, Hot Springs, Conway, and Bentonville … The Columbus and Seymour (Indiana) offices of Kemper CPA Group have merged with Evansville-based Agresta, Storms & O’Leary PCValente & Co. CPAs PLLC has added O’Brien Shortle Reynolds & Sabotka, PC of Rutland, Vt.

Please send your professional and firm news to us at

CPE events

  • Business Valuation Ethics. February 3, 10:00 a.m.-11:40 a.m. PT/1:00 p.m.-2:40 p.m. ET. Featuring: Scott Saltzman (Saltzman LLC).

Learn about how to avoid inadvertently violating the professional valuation standards. This webinar includes a discussion of the standards for appraisal reviews.

Learn why the M&A model with private data is the more reliable approach to business valuation than the buildup method with public data.

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


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