BVR Logo February 10, 2021 | Issue #221-2

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

DOL and Professional Fiduciary Services settle ESOP suit

The DOL recently settled a suit against Professional Fiduciary Services (PFS) related to a 2012 transaction in which PFS served as trustee in an ESOP acquisition of outstanding company stock. Following the playbook, DOL alleged PFS breached its fiduciary duties by causing the ESOP to pay more than fair market value for the shares.

The company was Contractors Register Inc., a New York-based company that provides construction search engines. According to Bloomberg, the company publishes regional directories and databases for the construction industry. In 2010, the company’s shareholders recapitalized most of their equity in the company with long-term, low-interest notes. The company’s capital structure was highly leveraged, but the balance sheet showed over $90 million in cash. The remaining shareholder then wanted to sell his interest to employees via an ESOP. The acquisition, which took place in late 2012, left the ESOP with 100% of the company stock.

PFS was engaged as independent trustee. PFS hired an independent appraisal firm and a law firm to act as trustee counsel.

Familiar complaint: The DOL’s complaint alleged PFS breached its fiduciary obligations to the plan by failing to scrutinize the valuations underlying the transaction and overlooking red flags, such as overly aggressive revenue projections, which produced an inflated valuation of the company’s stock. Among other things, the DOL objected to the projected 2.2% compound annual growth rate for 2013 to 2017. The DOL said the appraiser did not explain how the company would achieve this growth rate but simply relied on management projections. Further, projections of capital expenditures and working capital needs were unreasonable. Also, there was no real negotiation over the purchase price.

The seller offered to sell the outstanding shares for $26,770,000. The independent valuator arrived at a value range between $26.2 million and $40.5 million, with a midpoint of $32.9 million (3.4 to 4.1 times average EBITDA). PFS agreed to a price of $26.7 million. The seller provided 100% of the financing in the form of a note from the company. There were no warrants or other claims on equity.

The DOL sued PFS in December 2019. In December 2020, the parties agreed to a settlement in mediation.

Settlement: Under the recent settlement, PFS will pay $750,000 to the ESOP in three installments. Also, PFS and its president, John Michael Maier, agreed that Maier would no longer accept engagements to serve as trustee in new ESOP formation transactions. PFS notes that the settlement does not prevent PFS/Maier from accepting engagements to sell ESOP stock, serving as successor trustee, undertaking stock acquisitions for existing ESOPs, undertaking, releveraging transactions, and continuing to serve as trustee for existing clients. PFS also agreed not to accept indemnification from CRI or other ESOP clients for breach of fiduciary duties violations. Under the settlement, PFS and Maier do not admit to any breach of their fiduciary duty to the CRI ESOP.

2020 EBITDA multiples rebound, per DealStats

In 2Q20, EBITDA multiples (median selling price/EBITDA) across all industries dropped to 3.7x as deal activity almost came to a halt, according to BVR’s DealStats Value Index (DVI) report for 1Q 2021. But the multiples rebounded by the second half of 2020, to 4.7x in the third quarter and 4.4x in the fourth quarter, returning to levels near historical norms (see graph). “In doing so, this continued the trend of the median EBITDA multiple reporting at its highest level during the second half of the year as seen from 2015 to 2018 and in 2020,” the report says. As small businesses still navigating through the COVID-19 pandemic and a new administration implementing its economic policies, DealStats will continue to monitor the trends in the EBITDA multiple.

Exhibit 1A. Median selling price/EBITDA with trailing three-quarter average

LEI up but at slowing pace, reports BVR’s EOU

In December 2020, the U.S. Leading Economic Index (LEI) improved 0.3%, to 109.5 points, which follows an increase of 0.7% in November, reports the Economic Outlook Update (EOU) published by Business Valuation Resources (BVR). The report noted that the LEI’s slowing pace of increase in December suggests that U.S. economic growth continues to moderate in the first quarter of 2021. The report further states that, while the resurgence of COVID-19 and weak labor markets remain barriers to growth, the Conference Board expects the economy to expand by at least 2.0% (annual rate) in Q1 and then gain momentum throughout the year.

The 54-page December 2020 Economic Outlook Update contains expansive research from leading authoritative resources, which you can use in your valuation reports as long as you give proper attribution. To learn more, visit

Damodaran updates cost of capital data

Professor Aswath Damodaran (New York University Stern School of Business) has started his annual posting of data updates on his website that include risk-free rates, equity risk premiums, corporate default spreads, corporate tax rates, country risk premiums, and other data—all of which is free. He does a series of posts on his blog based on these new data. The first post takes a look back at 2020 and explains the background of his annual data analysis. A recent survey of valuation analysts found that 13% use Damodaran’s data for developing an estimate of cost of equity.

Fairness opinion provider rankings for 2020

The “Global Mergers & Acquisitions Review: Full Year 2020/Financial Advisors” from Refinitiv contains M&A statistics and also rankings for worldwide providers of fairness opinions. Here are the top five providers (based on the number of transactions) of announced fairness opinions rendered in the United States:

  1. Stout (2019 rank: 2);

  2. Duff & Phelps (2019 rank: 1);

  3. Houlihan Lokey (2019 rank: 3);

  4. J.P. Morgan (2019 rank: 4); and

  5. Piper Sandler (2019 rank: 9).

Globally, the top five providers of announced fairness opinions are:

  1. CITIC (2019 rank: 8);

  2. Duff & Phelps (2019 rank: 1);

  3. (tie) Houlihan Lokey (2019 rank: 4);

  4. (tie) Stout (2018 rank: tied for 3); and

  5. J.P. Morgan (2018 rank: 2).

NACVA announces ‘hybrid’ conference from
Park City, Utah

Hopefully, the conference scene will start to get back to normal this year and we will be able to see each other in person. The National Association of Certified Valuators and Analysts (NACVA) has announced its 2021 Business Valuation & Financial Litigation Hybrid & Virtual Super Conference to be held June 21-25 in Park City, Utah. The event will be held in person and broadcast virtually from The Chateaux Deer Valley and select state chapters of NACVA. All super conference sessions will be broadcast virtually, and the agenda, when published, will indicate where the sessions will originate. Attendees have three options: (1) attend on-site in Park City; (2) visit a state chapter; or (3) attend virtually from home or office.

There are early-bird discounts (on a sliding scale), and you can save $350 if you register by February 15.

Kohli scores again with top celebrity brand value in India

Virat Kohli, captain of the India national cricket team, has topped the powerful celebrity brand list of Duff & Phelps for the fourth year in a row, according to its Celebrity Brand Valuation Study 2020: “Embracing the New Normal.” The report is a deep analysis of how endorsements affect the brand value of celebrities alongside other factors such as age, fees charged per endorsement, social media presence, and the like. It also examines the impact of the pandemic on both brand value rankings and the celebrity endorsement space. Kohli has a brand valuation of $237.7 million followed by actor Akshay Kumar, at $118.9 million.

BV movers . . .

People: John Schumacher, CFA, has launched a new firm, True Financial POV, based in Chicago; the firm provides a range of valuation and advisory services for purposes of marital dissolution, financial reporting, shareholder transactions and disputes, ESOP administration and transactions, trust and estate planning, and compliance and corporate planning … Pamela Oliver, CPA/ABV, CDFA, MAFF, has been admitted to the partnership group at Warwick, R.I.-based DiSanto Priest & Co.; she has more than 20 years of experience, which the firm says will greatly complement and strengthen its business valuation and matrimonial litigation services … Matthew Nadeau, CPA, CVA, CFE, has been promoted to principal at Concord, N.H.-based Nathan Wechsler & Co. PA; he joined the firm in 2012 and specializes in serving manufacturers and construction businesses, performing business valuations, and assisting with mergers and acquisitions … Andrew T. Moon, CPA/ABV, has been promoted to partner in the tax department at Tronconi Segarra & Associates LLP (Williamsville, N.Y.).

Firms: Farmington Hills, Mich.-based UHY LLP has acquired Pietrasiuk Kelley & Kelley (PKK) of Ann Arbor, Mich., improving campus recruiting in the area and the firm’s ability to grow in Washtenaw County and beyond … Aprio LLP, based in Atlanta, has acquired digital transformation and cybersecurity consulting company Syzygy Solutions of Sandy Springs, Ga., and its IT staffing firm Velossent … New York-based EisnerAmper LLP is adding Goldin Peiser & Peiser LLP (GPP) of Dallas, a firm with eight partners and a staff of 75 that provides audit, tax, and advisory services to growing and midsized companies in sectors such as healthcare, manufacturing and distribution, real estate, and construction … Postlethwaite & Netterville of Baton Rouge, La. has acquired the tax practice of Harry V. Barton CPA of Lafayette, La. Towson, Md.-based Rosen, Sapperstein & Friedlander LLC (RS&F) launched a new website (, which highlights the firm’s diverse array of services and industries in which it has expertise.

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CPE events

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

Not to be missed! This is the first webinar in a three-part series on the integrated theory of business valuation presented by the authors of the acclaimed book that describes a framework to help valuation analysts develop base valuation conclusions, discounts, and premiums that are rooted in a shared perspective of the subject company and the subject ownership interest. Webinar attendees get a special $30 discount on Business Valuation: An Integrated Theory, 3rd edition. Be on the lookout for coupon details.

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