BVR Logo July 17, 2019 | Issue #202-2

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


Interesting results from our cost of capital survey

A significant number of valuation experts look to the private capital markets when estimating the cost of capital for a private firm, according to a BVWire survey. While most experts extrapolate data from the public security markets and adjust them to their subject private company (55% say they use this approach exclusively), 42% say they use both approaches. Here are the other interesting results from our survey:

  • When using public market data, 47% of survey respondents prefer the buildup method; 16% use CAPM, and 37% use both;
  • Sixty-nine percent of respondents say they use public market data from Duff & Phelps, while 45% use data (provided free) from Professor Aswath Damodaran of New York University; 13% say they use data (also free) from Professor Pablo Fernandez of the University of Navarre in Spain;
  • As for private capital market information, 40% use the Private Capital Markets Report (Pepperdine University); 23% use BVR’s Private Company Cost of Capital Index (based on DealStats data); and 22% use information from Cambridge Associates (U.S. Venture Capital Index or the U.S. Private Equity Index); and
  • Over half (56%) of respondents say they use the Duff & Phelps Cost of Capital Navigator online tool for estimating the cost of capital, while 34% use their own internally developed application; a new entrant, BVR’s Cost of Capital Professional, has gained traction and is used by 18% of respondents.

We had 62 responses to our survey, so our thanks to those who participated! We’ll have the next installment in our series of cost of capital surveys in the next issue of BVWire.

Is someone peeking at your cost of capital estimates?

If you use one of the new online tools that help you estimate the cost of capital, you may be worried about data security. This is sensitive client data, and you don’t want the wrong eyes giving it the once-over, especially if the matter may end up in litigation. Don’t be concerned, say the providers of the Duff & Phelps Cost of Capital Navigator and BVR’s Cost of Capital Professional. They say that these tools are designed so that the data are absolutely secure and only the subscriber has access to what is input and stored. Any monitoring going on is for customer service purposes only, such as to troubleshoot technical problems a subscriber may be having. For more details, read a full article on this in the August issue of Business Valuation Update.

FASB revisits goodwill impairment testing

The issue of annual impairment testing versus amortization of goodwill is being revisited with the Financial Accounting Standards Board (FASB) issuance of an Invitation to Comment (ITC) on how to account for certain identifiable intangible assets acquired in a business combination. Private companies and not-for-profit organizations got relief from the rules after struggling with the burden of annual testing. In preliminary outreach with public-company stakeholders, the FASB received mixed feedback “indicating that the benefit of certain intangible asset and goodwill impairment information might not justify the cost of preparing and auditing that information,” according to the 34-page ITC. The document is divided into five sections addressing the following topics:

  1. Whether to change the subsequent accounting for goodwill;
  2. Whether to modify the recognition of intangible assets in a business combination;
  3. Whether to add or change disclosures about goodwill and intangible assets;
  4. Comparability and scope; and
  5. Other topics for consideration.

Comments on the ITC are due by October 7. For more information, see the video and the ITC on the FASB’s website. After receiving comments, the FASB will host a formal roundtable.

Final PE/VC guide out soon from the AICPA

This August or September, you can expect to see a final version of the AICPA’s new Accounting and Valuation Guide Valuation of Portfolio Company Investments of Venture Capital and Private Equity Funds and Other Investment Companies. The guide provides “nonauthoritative guidance” and addresses many accounting and valuation issues regarding portfolio company investments held by investment companies within the scope of FASB ASC 946. The guide is also useful for other entities, such as corporate venture capital groups or pension funds.

Mercer's 'Rule of Three' for building a practice

One of the techniques that has contributed to the success of Mercer Capital since it was established in 1982 is that founder Chris Mercer uses a “Rule of Three” as part of the firm’s marketing strategy. “It’s very simple: just contact three people a day,” Mercer told an audience during a recent webinar. It can be an email, a thank-you note, or a phone call (voice mails count). It sounds easy, but it’s also easy to forget during busy days, but “think of the math,” says Mercer. Even if you miss some days, it will add up to over 600 points of contact for the year. The webinar is part of a new series hosted by Rod Burkert (Burkert Valuation Advisors LLC) titled Practice Development INSIDER that feature some of the leading valuation practitioners revealing their time-tested ideas behind building a practice. Upcoming webinars will feature Jim Hitchner (August 2) and Nancy Fannon (September 6). To register, go to Burkert’s website.

New edition of cannabis market research guide

For business appraisers who are valuing firms in the cannabis industry, The State of Legal Cannabis Markets, 7th edition, is now available. ArcView publishes the guide, and there is a discount for BVR customers. If you use the discount code “BVR100,” you will receive a $100 discount. This guide is a good companion to The Cannabis Industry Appraisal and Accounting Guide and What It’s Worth: Value and Business Challenges in the Budding Cannabis Industry.

P/E multiples rebound in India

The P/E multiples of a majority of industries have improved in the first quarter of 2019, according to the Duff & Phelps “Industry Multiples India Report – Seventh Edition.” “Overall, the Indian equity market, i.e., the S&P BSE 500 Index, experienced an increase during Q1 2019 on the back of hopes of a stable government and a moderate increase in crude oil prices,” the report says. Some observations: The banking sector has recovered partially due to capital infusion in public-sector banks; a reduction of GST rates gave consumer durables a slight improvement; the healthcare, internet, and software sectors recovered from last quarter’s decline because of an optimistic demand outlook; and the automobile sector saw a decline in multiples due to subdued demand and high inventory levels. The report, for the quarter ended March 31, 2019, provides a detailed overview of the market multiples of companies in 22 major industries in the S&P BSE 500 Index.

Preview of the August 2019 issue of Business Valuation Update

Here’s what you’ll see:

  • “Concerns Over Data Security in Online Cost of Capital Tools” (BVR Editor). Business Valuation Update attended the recent NYSSCPA business valuation conference in New York City where several attendees expressed concerns about entering sensitive client data into online tools for estimating the cost of capital. The providers of the Duff & Phelps Cost of Capital Navigator and BVR’s Cost of Capital Professional respond to these concerns.
  • “Response to a Reader’s Comments Concerning the Kress Case” (Chris D. Treharne). The Kress case has received a great deal of attention on a number of valuation fronts, most notably that both the taxpayer and the government tax affected the earnings of the subject S corp. This letter to the editor is a response to comments on the case made by an IRS analyst.
  • “Company Research: The Internet May Be Right, But It May Also Be Wrong!” (Robert E. Kleeman Jr.). This is an article in a series of valuable lessons to be learned based on the experiences of seasoned valuation experts. While you may be able to find some of this advice in books, only real-life experiences can highlight the nuances that can only be found in the minds of the experts who have lived through many engagements.

The issue also includes:

  • An expanded 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/Revenue Trends,” “ktMINE Royalty Rate Data,” “Economic Outlook for the Month,” and “Cost of Capital Center.”
  • BVLaw Case Update: The latest court cases that involve business valuation issues.

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


BV movers ...

People: Adam Rabinowitz, CPA, CFF, CVA, CFE, has been promoted to forensic, advisory, and valuation services principal at Miami-based Kaufman RossinKelly Noll, CFA, has been promoted to director, valuation and financial opinion services, at Columbus, Ohio-based GBQ; she will be based in the Columbus office … Several promotions in the forensic, litigation, and valuation services area at Fort Worth, Texas-based Whitley Penn: Stephanie Wiles (Houston) to director; Chris O’Shell, CPA (Fort Worth), to manager; Jon-Reid Henz, CFE (Houston), to associate director; Matt Davis, CPA, CFE (Houston), to senior associate; and Amanda Stephens, CPA (Fort Worth), to senior associate … Marc Rosenkoetter has joined Atlanta-based Aprio as director of advisory services, an area that includes business valuation, transaction advisory, forensic accounting, data analytics, and other services … Brian Thomas is the new partner-in-charge, advisory services, at Houston-based Weaver, which consolidates all of the firm’s advisory practice groups: financial advisory (including valuation), risk advisory, IT advisory, and energy compliance services.

Firms: Cleveland-based CBIZ has acquired Paytime of Solon, Ohio, a payroll service provider with 37 employees and about $4 million in revenue … New York City-based Marcum has added The Abrix Group of Northbrook, Ill., a firm focused exclusively on the healthcare industry; the deal adds four partners and 22 associates to Marcum’s Illinois offices … St. Cloud, Minn.-based BerganKDV cut the ribbon to open its offices in Kansas City, Mo., and Omaha, Neb., as a result of its merger with HSMC Orizon, which added six partners and 45 employees to the firm.

Please send your professional and firm news to us at

Upcoming BVR training events

  • Purchase or Sale of the Closely Held Business
    (July 17), with R. James Alerding (Alerding Consulting LLC).

    How can you be the best advisor to your client, whether a buyer or a seller? This session will give you the ins and outs of the buying and selling process and how to synchronize all of the moving parts of the process.

  • Using Asset Attrition to Determine Useful Life (July 25), with Raymond Rath (GlobalView Advisors).
    This is part of BVR’s Special Series on Fair Value.

    Learn how to measure the attrition and, ultimately, remaining useful lives of all asset types. This will be
    a discussion of the principles, methodologies, and professional guidance that go into these measurements.

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

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