BVR Logo February 5, 2025 | Issue #269-1

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



Divorcing business owner kept PPP loan a secret

In an Ohio case, the couple began negotiating terms of their divorce in October 2020 and decided to use Dec. 31, 2020, as the valuation date for marital assets. The main asset was the husband’s business, which provided corporate staffing and recruiting services.

On the sly: COVID-19 impacted the business, so, in March 2021, amid divorce negotiations, the husband applied for a PPP loan and got $9.4 million in April 2021. But the husband did not tell the wife or the valuation experts about the loan, even though the experts were still working on their valuations of the business. Negotiations were finalized, and the trial court granted the divorce in October 2021, using the valuation of the husband’s business without consideration of the PPP loan. The next month, November 2021, the loan was forgiven, which was also kept secret.

Later, the wife found out about the loan and went back to the trial court, claiming that the husband’s failure to disclose it was fraud and misrepresentation of the value of the business. The court agreed and vacated the dissolution decree.

Hold on: The husband appealed, and the appellate court reversed the trial court, ruling that there was no fraud and the PPP loan should be excluded since it was received after the agreed-upon valuation date. This was not a unanimous decision—a dissenting opinion stressed that the trial court has wide discretion to achieve equitable distribution in marital cases and it was correct to reconsider the matter because of the husband’s concealment of the PPP loan.

The case is Beach v. Beach, 2024 Ohio App. LEXIS 4637; 2024-Ohio-5991, and a case analysis and full court opinion are available on the BVLaw platform.

AI detection tools are not foolproof

For a variety of reasons, valuation experts will want to determine whether AI or an actual human being generated content. For example, in litigation, if an opposing expert’s report is found to include AI-generated content, it can weaken their testimony if attorneys question the level of personal expertise applied to the analysis. A recent article discussed this, and the author tested three tools designed to detect content that AI generated. The tools were put through their paces on an AI-generated paragraph and a human-written paragraph. Here are the results:

  • Grammarly’s AI detector was the most accurate among the three, successfully distinguishing between AI and human content;
  • Phrasly.AI performed poorly, mistakenly classifying AI content as human and struggling with short text; and
  • ZeroGPT showed inconsistent results, correctly identifying human content but failing to recognize AI-generated text.

The article, written by Miranda Kishel (Development Theory), is in NACVA’s QuickRead publication, and you can read it if you click here.

New survey reveals challenges of reflecting ESG in valuation

The most frequently cited challenge to the integration of environmental, social, and governance (ESG) considerations in valuations is the lack of standardized metrics for measuring ESG impacts. This is according to the results of a survey published in a new “Perspectives Paper: The Integration of ESG in Valuation Practices: IVSC Global Survey 2024.

Based on responses from 542 valuation professionals in 85 countries, the survey examines:

  • The extent to which ESG factors are being incorporated into valuations;
  • The opportunities and challenges associated with ESG integration; and
  • The role of international standards like IVS in providing a consistent framework for valuations.

The paper recommends the development of standardized metrics for evaluating ESG factors in valuations, increased education and training on the value impact of different ESG factors, and greater engagement between valuers, clients, and regulators to help ensure that ESG factors are appropriately valued.

Now open: Pepperdine’s 2025 private cost of capital survey

Each year, Pepperdine University conducts a survey of expected rates of return with respect to private companies. This year’s survey is now open, and input is needed from anyone involved in the funding of private businesses, including funding providers, recipients, investors, intermediaries, and advisors. The information you provide is confidential. For a direct link to the survey, click here. The results are used to produce the annual “Private Capital Markets Report,” which is free if you fill out the survey—plus you’ll get the report one to two weeks early. Reports from prior years are available if you click here.

Year-end 2024 data now live in BVR’s CCPro

Year-end 2024 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 maintain professional judgment.

The most recent enhancement to the platform was the addition of industry debt percentages that can be used when determining a weighted average cost of capital (WACC). Users have the flexibility to enter any inputs from outside the platform, and it includes a “notes” box to add documentation about that input. Users also have access to unlevered industry betas, which allows you to relever using the Hamada formula at a selected debt-to-equity ratio, for use in the capital asset pricing model (CAPM). For a personalized demo of the platform, click here.

Reminder: Comments due February 24 on proposed IRS Circular 230 regs

The IRS is continuing to accept public comments on proposing changes to its Circular 230 that will strengthen its ability to disqualify appraisers who do tax-related valuations. The changes are in proposed regulations that were published Dec. 26, 2024, in the Federal Register that update the rules for certain tax professionals (click here to access—see Paragraph L for the appraiser provisions).

Among other changes, under the proposed regulations, “all appraisals submitted in an administrative proceeding should conform to the substance and principles of the Uniform Standards of Professional Appraisal Practice (USPAP) promulgated by the Appraisal Standards Board of the Appraisal Foundation or the International Valuation Standards (IVS) promulgated by the International Valuation Standards Council.”

February 24 is the deadline for comments (electronic or written), and that is also the deadline for requests to speak at a public hearing, which is scheduled for March 6. Details on submitting comments and requests to speak are in the Federal Register document, which is available if you click here.

New version of IVS is now in effect—and it’s free to access

The latest edition of the International Valuation Standards (IVS) went into effect on January 31, and the IVSC has taken them out from behind the paywall and they are now free to access (click here to download a copy). The free access “represents an important step in supporting the widespread adoption and implementation of these standards across global markets,” the organization says. The latest version is a “significant update,” which includes new chapters on data and inputs, documentation, and financial instruments. It also features improved navigation and integrated digital tools.

BV movers . . .

People: Charles Higgins, CFA, has been promoted to partner at Philadelphia-based Centri Business Consulting; he has over 30 years of experience in providing fairness and solvency opinions in connection with going private transactions, spinoffs, related-party transactions, recapitalizations, and restructurings … Chet Dominik has joined HKA as director in the firm’s Forensic Accounting and Commercial Damages practice team in Chicago; he is a commercial damages and intellectual property expert with over 16 years of experience with financial and economic damages analysis and quantification, business and IP valuations, and patent infringement assessments … Leigh Miller, global conflicts leader at Ernst & Young, has been appointed to the board of trustees of the International Valuation Standards Council; he has over 30 years of experience in providing a broad range of valuation services to clients and has held a number of leadership positions in the valuation profession and has been actively involved with the IVSC for many years, having previously served on the Standards Review Board.

Firms: Columbus, Ohio-based GBQ Partners LLC has acquired Cincinnati-based Wirth Lowe Wissemeier CPAs Inc., a small-business tax firm that will operate out of GBQ’s Cincinnati’s office … New York City-based Grassi has acquired Chelmsford, Mass.-based Anstiss & Co. PC, which provides family-owned businesses, nonprofits, and high-net-worth individuals; six partners and 50 professionals and staff will join Grassi from Anstiss … San Francisco-based SD Mayer & Associates LLP has acquired Ronald Ruttenberg & Co. CPAs (RRC), a firm that provides tax, accounting, and consulting services.

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

CPE events

Power Panel—February 2025: Trends and Issues in Business Valuation, February 12, 10:00 a.m.-11:40 a.m. PT/1:00 p.m.-2:40 p.m. ET. Featuring: Ken Pia (Marcum), Jeffrey S. Tarbell (Houlihan Lokey), Neil J. Beaton (Alvarez & Marsal), and Michelle F. Gallagher (Adamy Valuation). CPE credits: 2.0.

They’re back! And they will discuss some of the hottest topics in the business valuation profession.

Succession Planning for BVFLS Firms, February 13, 10:00 a.m.-11:40 a.m. PT/1:00 p.m.-2:40 p.m. ET. Featuring: Rod Burkert (Burkert Valuation Advisors) and John Schlegel (Stonebridge Search). CPE credits: 2.0.

If you are a practitioner struggling to grow your firm or looking to retire, you’ll want to listen to this very frank discussion about succession planning.





We welcome your feedback and comments. Contact Andy Dzamba (Executive Editor) at: info@bvresources.com.

 


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