Next-gen BVers warn about too much technology

Veteran valuation experts have raised red flags about relying too much on technology and automation. This advice is directed particularly to young BV practitioners who have grown up surrounded by automation. But their young colleagues are well aware of this issue and share their concerns.

Watch out: Young up-and-coming BV experts on a recent panel feel that technology will not totally replace the human element in the valuation process. They say there is “so much judgment” involved that technology cannot handle the entire process. There was even the comment that too much automation makes someone a “little nervous,” feeling that experts may lose some understanding of the underlying concepts. But one panel member points out that automated tools could actually enhance understanding by freeing up analysts’ time typically spent on number crunching so they could spend that time learning about what’s behind all the crunching.

If this panel is any indication of young practitioners as a whole, there’s no worry that professional judgment will take a back seat to computer models.

The panel also talked about how and why they chose valuation as a profession, what they need from their firms in order to develop, and other matters. Full coverage of the session is in the March 2023 issue of Business Valuation Update.

Panel members were Dalton Hopper (BMSS Advisors & CPAs), Amy Shaw (Soukup, Bush & Associates), and Nick Contey (DiGabriele, McNulty, Campanella & Co.). The moderator was Bob Lewis, president of the Visionary Group. The session was conducted at the December 2022 NACVA Business Valuation & Financial Litigation Super Conference.

Wife who foregoes expert can’t complain about the outcome

A marital dissolution case in Illinois is another instance of a party not offering a competing valuation and then appealing the outcome—to no avail. The husband engaged a business valuation expert to appraise an entity that held two real estate properties. The expert testified that, while he was a business valuation expert, he often valued equity in real estate partnerships, for which he relied on appraisals or other estimates of value. In this case, for one property, he relied on a broker opinion of value and a market analysis from a relevant expert. For the other property, which was newly built, he based the value on the construction costs. The wife did not engage a valuation expert to appraise the properties. The trial court accepted the valuation done by the husband’s expert and the wife appealed. But the appellate court upheld the trial court’s decision, noting that there was “sufficient foundation” for the expert’s determination of value. Plus, the court pointed out (citing a prior case), “where a party does not offer evidence of an asset’s value, the party cannot complain as to the disposition of that asset by the court.”

The case is In re Trapp, 2022 IL App (3d) 210291-U; 2022 Ill. App. Unpub. LEXIS 1914, and a case analysis and full court opinion are available on the BVLaw platform.

New case on damages in the metaverse

An artist is liable for trademark infringement after creating and selling a series of non-fungible tokens (NFTs) that depict fur-covered purses resembling the iconic Hermès Birkin bag. The series of NFTs were called “MetaBirkens” and were sold on the blockchain. They initially sold for about $450 each, but the NFTs from the artist’s limited collection were bought for as much as $46,000 just two weeks later, according to a report in Tatler. The jury reached a verdict of liability for trademark infringement, trademark dilution, and unlawful cybersquatting on the MetaBirkins.com domain name. They awarded Hermès the $110,000 of profits from the artist’s sale of the NFTs and $23,000 in damages for cybersquatting, according to a report in Lexology. The case is: Hermes Int’l v. Rothschild, No. 22-CV-384 (JSR), 2023 WL 1458126, at *1 (S.D.N.Y. Feb. 2, 2023).

BIZCOMPS now has over 15,000 transactions

A new infographic shows that BIZCOMPS, the database of sales transactions involving small “Main Street” private companies, now includes over 15,165 deals. The infographic also points out that the database covers transactions for over 500 industries and the transactions include 21 data fields. Search tip: When using BIZCOMPS, we recommend searching for transactions not only by SIC code, but also by business description. This will allow you to gather a more comprehensive selection of transactions because SIC codes are occasionally outdated or inaccurate.

NACVA sets dates for two “super” conferences

This year, NACVA will host two multi-day “super” conferences—one in Snowbird (Salt Lake City) July 12-14 and the other in Ft. Lauderdale Dec. 13-15. For those attendees who do not wish to attend the full events, there is an à la carte option that allows you to register for individual sessions. The details, including early bird discounts and session schedules, are forthcoming and you can sign up to be notified if you click here. NACVA is the National Association of Certified Valuators and Analysts which offers several credentials, including the CVA valuation credential and MAFF credential for forensics.

BVR to webcast Energy Valuation Conference May 11

For the fifth 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 11. The conference will feature presentations from nationally recognized speakers who are profession leaders, covering a range of important topics in the industry. Details are forthcoming, but in the meantime, mark your calendars!

CBV Institute launches ED&I working group

The CBV Institute, Canada’s valuation professional organization (VPO) and standard setter will roll out a series of equity, diversity, and inclusion (ED&I) initiatives targeting the business valuation profession. The goals include (but are not limited to) increasing the number of women and other underrepresented groups to the profession. Recently, it founded an ED&I Working Group made up of CBV volunteers and industry experts that has a mandate to provide the VPO with input and advice on issues of ED&I with respect to the CBV profession, and the business valuation profession at large. To learn more, click here.

Preview of the March 2023 issue of Business Valuation Update

Here’s what you’ll see:

• “A Model for Forecasting a Multiple-Location, Growing Business” (BVR Editor). Veteran valuation expert Gary Trugman (Trugman Valuation) had an engagement that involved a business that operated a franchise with multiple locations—and was required to open a lot more. This article shows in detail how he did the forecasting.

• “More Insights From Young BVers About the Profession” (BVR Editor). The second of two panel discussions with young valuation and forensics experts reveal additional insights on their perspectives on the profession, including what attracted them to the profession and why they stay in it.

• “Simple Idea to Help Business Sellers Get All They Deserve” (BVR Editor). A valuation expert had a client who wanted to sell his company but had an unrealistic idea about price. The expert used DealStats to create a compelling visual that saved the deal from falling apart.

• “Considerations When Adding Litigation Services to a Valuation Practice” (BVR Editor). The 2022 AAML/BVR National Divorce Conference sparked some advice for moving your practice into litigation support services for marital dissolution or any other matters that are headed to court.

• “Valuation Expert Gets Caught Up in a Plagiarism Nightmare” (BVR Editor). A valuation expert in a divorce case was discredited over some material in his report that was copied from outside sources without attribution. With the proliferation of data and research on the web, it is easy to inadvertently use something and then forget to add the attribution.

• “NICE DLOM Method for FLPs Gets Peer Reviewed” (BVR Editor). A paper describing the theory and mechanics of the nonmarketable investment company evaluation (NICE) method for estimating a discount for lack of marketability (DLOM) has been published in the Business Valuation Review, the peer-reviewed journal of the American Society of Appraisers.

The issue also includes:

• A full section of “BV News and Trends/Global BV News and Trends”;

• Regular features: “Ask the Experts” and “Tip of the Month”;

• BV data spotlight: “DealStats MVIC/EBITDA Trends,” “Stout Restricted Stock Study and DLOM Calculator,” “Economic Outlook for the Month,” and the “Cost of Capital Center”; and

• BVLaw Case Update: The latest court cases that involve business valuation issues.

To stay current on business valuation, check out the March 2023 issue of Business Valuation Update.

BV movers . . .

People: Mercer Capital has announced the promotions of Matthew R. Crow, CFA, ASA, to CEO and Travis W. Harms, CFA, CPA/ABV, to president; Travis also joins the firm’s board of directors.

Firms: Troy, Mich.-based Doeren Mayhew has acquired the Small Business Administration (SBA) consulting practice of St. Petersburg, Fla.-based Garcia & Ortiz PA, a firm that has completed more than 15,000 SBA loan reviews and developed its own proprietary software (GOLoan Review) to help lenders review their 7(a) loans for compliance to standard operating procedures … Chattanooga, Tenn.-based Henderson Hutcherson & McCullough CPAs (HHM CPAs) has opened its third office in Cleveland, Tennessee; the firm’s other locations are in Chattanooga and Memphis, Tennessee … Miami-based De La Hoz, Perez & Barbeito, PLLC (DPB) has merged with Roy G. Glassberg CPA PA, a firm that provides tax and accounting services to individual and corporate clients with a concentration of clients in the real estate industry.
Please send your professional and firm news to us at editor@bvresources.com.

CPE events

• A Hybrid Approach to Determining Company-Specific Risk. February 21, 10:00 a.m.-11:40 a.m. PT/1:00 p.m.-2:40 p.m. ET. Featuring: David H Goodman (Jesson, Oslin & Associates, LLP). CPE Credits: 2.0.

The multiattribute utility model (MUM) plus Monte Carlo simulation are used to determine the range of potential company-specific risk premium. Attendees will have access to two Excel worksheets that utilize the models.

• Valuing Real Estate Centered Entities in 2023. February 22, 10:00 a.m.-11:40 a.m. PT/1:00 p.m.-2:40 p.m. ET. Featuring: Robert Schlegel (Houlihan Valuation Advisors). CPE Credits: 2.0.

A review of the problems business appraisers and analysts see in companies holding substantial amounts of real estate, often necessary to run the business and produce cash flow.