BVR Logo July 28, 2021 | Issue #226-3

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

DLOM survey reveals methods of choice

The use of restricted stock studies remains the most cited methodology for quantifying a discount for lack of marketability (DLOM), according to the preliminary results of BVR’s 2021 DLOM survey. Nine out of 10 respondents say they use restricted stock studies, with the Stout study being the front runner (75% say they use the Stout study).

Option pricing models are the second most-cited methodology (48%), and 45% of respondents use pre-IPO studies. Rounding out the top five are the Johnson/Park empirical method (27%) and Mercer’s quantitative marketability discount model (22%). The survey had over 200 respondents, and multiple methods could be chosen in the survey questions. When asked how many methods respondents use in their analysis, 38% say they use two methods, 25% use three methods, and 21% use just one method.

BVR has been conducting this survey for over 10 years, the last one being done in 2018. The order of the five most-cited methodologies remains the same (see chart below) but the percentages for most of them have increased. We point out that this year’s survey had twice the number of respondents as the 2018 survey, so that may account for some of the changes.

DLOM Methodology 2021 2018
Restricted stock studies 90% 75%
Option pricing models 48% 42%
Preinitial public offering (pre-IPO) studies 45% 38%
Johnson/Park empirical method (Partnership Profiles) 27% 32%
Mercer's quantitative marketability discount model (QMDM) 22% 11%
None of the above 1% n/a
Other 24% 23%

Respondents who checked the “Other” category cited such methods as cost of flotation (14%), Long-Term Equity Anticipation Securities (13%), VFC DLOM Calculator (7%), Ashok B. Abbott analysis (6%), and NICE (5%).

More next week: The survey asked more questions about DLOM methodology and practice, and we will have more results in next week’s BVWire. We will also make the full results freely available to everyone. Thanks to everyone who participated!

Kentucky appeals court explains state’s
goodwill law

An unpublished opinion from the Kentucky Court of Appeals provides important insight into the court’s thinking as to the goodwill analysis trial courts must perform under the applicable state law when valuing business entities. Under controlling Kentucky law, only enterprise goodwill is a marital asset subject to marital distribution.

Scope of Gaskill: During the marriage, the ex-spouses started a chimney business. The husband worked as a chimney sweep, and the wife performed other tasks, including bookkeeping. The valuation of the company was important both for marital distribution purposes and determining alimony to the wife.

The wife relied on expert testimony from a CPA whose testimony and expert report included statements that 70% of the company’s value was personal goodwill and 30% was enterprise goodwill. The trial court accepted this expert’s overall valuation. At the same time, in determining the value of marital assets for property distribution’s sake and calculating income for alimony’s sake, the trial court disregarded the expert’s goodwill allocation.

The husband appealed the court’s findings on a number of grounds, including assigning error to the trial court’s decision to ignore the opposing expert’s goodwill analysis.

The Court of Appeals sided with the husband. The reviewing court first noted that the controlling case is the state Supreme Court’s Gaskill v. Robbins decision, which involved the valuation of an oral surgery practice that was organized as a sole proprietorship. In Gaskill, the high court adopted the distinction between enterprise and personal goodwill. Under the facts of Gaskill, the court found: “[T]here can be little argument that the skill, personality, work ethic, reputation, and relationships developed by [the owner spouse/doctor] are hers alone and cannot be sold to a subsequent practitioner.” Further, “[t]o consider this highly personal value as marital would effectively attach [the owner’s] future earnings, to which [the nonowner spouse] has no claim.”

In the instant case, the Court of Appeals invalidated the trial court’s judgment on this ground.

Moreover, the Court of Appeals dismissed the wife’s argument that Gaskill did not apply here because Gaskill dealt with a professional business whereas the contested business was a nonprofessional entity. The appeals court said it knew of no authority that definitively addressed whether Gaskill applied to valuing professional and nonprofessional business entities alike.

But, according to the appeals court, “though the issue may more often arise when valuing a professional entity, we conclude that Gaskill also applies to valuing nonprofessional entities.” Here, ignoring the expert’s unrebutted goodwill conclusions resulted in an approximately $200,000 increase in the marital portion of the company’s value, the Court of Appeals noted. In remanding, the appeals court ordered the trial court either to accept the expert’s goodwill conclusions and make the requisite apportionment of value or reject the goodwill analysis and provide a good explanation for doing so.

A digest of Maginnis v. Maginnis, 2021 Ky. App. Unpub. LEXIS 378; 2021 WL 2483877 (June 18, 2021), and the court’s opinion will be available soon at BVLaw. Subscribers also have access to a digest of Gaskill v. Robbins (II), 282 S.W.3d 306 (Ky. 2009), and the court’s opinion.

SEC comment letters uncover COVID-19 disclosures per PwC analysis

Valuable information can be gleaned about fair value measurement issues from comment letters the Securities and Exchange Commission (SEC) sends after it reviews public companies’ financial statements and disclosures. These letters are sent if the agency has questions or sees problems. PwC has posted its latest version of “SEC Comment Letter Trends” (comment letters publicly issued in the 12 months ended March 31, 2021), and the SEC has begun to issue comments related to COVID-19 disclosures. These comments focus on company-specific disclosures of pandemic-related risk factors and the discussion of known trends and uncertainties, including expectations of the impact on operating results and near- and long-term financial condition. Other topics of interest in the comment letters include business combinations, fair value (valuation techniques and inputs), and goodwill and other intangibles. Examining the issues in the comment letters can help you make sure you have addressed these areas properly in your own engagements.

Paper examines vanishing $10 billion of Sprint’s brand value

Prior to being acquired by T-Mobile in April 2020, Sprint had a brand with a value of $8 billion to $12 billion, according to all the major rankings of the most valuable brands. In August 2020, T-Mobile officially discontinued the brand. What happened to all that brand value? A new white paper from MARKABLES covers the whole story. It discusses the longevity of brand spending and the circumstances that foster a successful rebranding. One key finding is that digitized customer relations make branding and brands more dispensable. “It is one of the great misunderstandings of brand valuation—the impact of modern business models and customer relations on the longevity (and size) of brand value,” the paper says. The white paper is available for download if you click here. MARKABLES is a provider of data designed to support the valuation of IP assets.

Updated data for estimating DLOC in closely held holding companies

Closed-end fund (CEF) data are commonly used to derive discounts for lack of control (DLOC) for closely held holding companies invested in marketable securities. Updated versions (to January 2020) of two sources of CEF data, prepared by Bruce A. Johnson and James R. Park, are now available:

  • 2021 Closed-End Fund Report: Fixed Income Securities. Use this report to compare privately held family limited partnerships (FLPs) and LLCs that hold money market funds, certificates of deposit, government bonds, municipal bonds, corporate bonds, or other fixed income investments.

CBV Institute sees healthy membership growth

The Chartered Business Valuators Institute (CBV Institute) is Canada’s valuation professional organization (VPO) and standard-setter. Over the past year, it saw membership grow 6%, the most in the last decade, from 2,086 members in 2020 to 2,215 members in 2021, according to its latest year in review. CBV Institute members have the Chartered Business Valuator (CBV) designation. It holds an annual conference, the CBV Congress, which BVWire attends. You can see some takeaways from this year’s event if you click here.

BV movers . . .

People: Thomas B. Bailey, CPA, CVA, and Daniel Keefer, CPA, CVA, have become partners at Bethesda, Md.-based Councilor, Buchanan & Mitchell, P.C. (CBM); Bailey is a partner and director in the firm’s Construction and Real Estate Group; Keefer has specific industry expertise with closely held corporations, dealerships, employee benefit plans, and high net worth individuals … Shlomo Lang, ASA, ABV, CEIV, and Peter Lohrey, PhD., CVA, CDBV, have joined the forensics and valuation services division of BKD CPAs & Advisors in the firm’s New York City office; Long is a managing director, and Lohrey is a director.

Firms: Princeton, N.J.-based Withum has acquired San Francisco-based OUM & Co. LLP, a firm with 11 partners and about 80 team members that provides assurance and audit, tax, SEC compliance, and client accounting and advisory services … Fort Worth, Texas-based Whitley Penn will merge with Werlein & Harris, P.C., of Houston; the deal will increase the firm’s size to approximately 650 employees, with about 125 in the Houston office … San Francisco-based BPM LLP is celebrating its 35th anniversary in July.

Please send your professional and firm news to us at

CPE events

Fair market valuations for physician compensation and physician arrangements, including topics such as contract adjustments, subsidy arrangements, malpractice insurance, telemedicine and cyber security, the Medicare Physician Fee Schedule, Stark Law, and much more, are discussed.

Take a tour of the industry and geographic data in the Bizminer database.

ASA 2021 International Conference

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


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