Why are valuers changing their Excel models?

In a world of economic turmoil and market volatility, valuation experts say they are spending a lot more time on business valuations. What’s more, they have had to retool their Excel models.

Here’s why: Valuers report that they are finding that costs are not moving with revenue as they did in the past. Inflation is having an uneven impact, so it is now necessary to dig down into the expense line items. As a result, they are seeing more adjustments to more line items in forecasts. Where before you would see a few adjustments, now there can be 10 or more. Excel models are being changed so that expense lines can be projected separately—instead of simply tying them to a ratio.

This was revealed during the Global Town Hall: State of the Global Markets and Their Effect on Business Valuation on May 16, an event that was a collaboration of various valuation professional organizations (VPOs).

Valuation experts also report other phenomena amid today’s turbulent environment. A recap of the event will be in the July issue of Business Valuation Update.

Husband vs. valuation expert, court splits the difference

In an Iowa divorce case, the wife engaged a CPA and valuation analyst to value the husband’s construction company, and he concluded a value of $1,020,597. The husband did not engage an expert, and his do-it-yourself valuation came in at $480,000. The court, not surprisingly, found the wife’s expert more persuasive—but still adjusted the valuation down to $800,000 based on “outstanding receivables and [the company’s] uneven history of success.” The husband appealed, but the appellate court affirmed the $800,000 valuation. There were other issues in the case, including the choice of valuation date and incomplete information.

The case is In re Marriage of Bainbridge, 2023 Iowa App. LEXIS 310; 2023 WL 2908648, and a case analysis and full court opinion are on the BVLaw platform.

First-ever conference on soft skills for valuers June 8

This past fall, BVR and the BV recruiting firm Borrowman Baker conducted a survey of American Society of Appraisers (ASA) members under the age of 40 whose primary discipline is business valuation. The results revealed some of the obstacles they see as hindering their career development. We are happy to see that the ASA has put together a half-day conference to help young professionals overcome these obstacles by developing the soft skills needed to take their careers to the next level. The event, 2023 Beyond Valuation—Professional Development and Growth Conference, was put together with the collaboration of Empire Valuation Consultants. Empire’s Bill Johnston is the conference chair. This is a virtual event that starts at 1:00 p.m. EDT on June 8 (recordings will be made available post-event). The agenda has some great topics and speakers. For more details and to register, click here (up to 4.8 hours of ASA CE and CPE credit are offered).

CMS talks Stark FMV June 27

In a rare chance to hear directly from a regulator, a Centers for Medicare & Medicaid Services (CMS) official will discuss the new definitions of fair market value (FMV) under the updated regulations for the Stark Law (the federal physician self-referral law) on a free June 27 podcast. To register, click here. The official, Lisa Ohrin Wilson, senior technical advisor, CMS, will be joined on the podcast by Alex Krouse, associate general counsel, Parkview Health, and healthcare valuation expert Tim Smith (TS Healthcare Consulting). Smith is the author/editor of The Complete Guide to Fair Market Value Under the Stark Regulations. The American Association of Provider Compensation Professionals (AAPCP) is producing the podcast. The updated regs represent a game-changer in determining FMV of physician compensation—don’t miss this podcast!

First recipient of the Kolodny Award

The National Family Law Trial Institute in Houston is an organization devoted to training family lawyers for trial. The students range from fledging lawyers to seasoned professionals. A faculty that includes top family law litigators, jurists, forensic, and business valuation experts from across the country does the training. A co-founder of the Institute was attorney Stephen Kolodny, who passed away in 2020. The Institute has initiated the annual Kolodny Award, to be given to an individual for unparalleled dedication and commitment to improving the trial skills of family law attorneys. The first Kolodny Award has been bestowed upon veteran valuation expert Jay E. Fishman, managing director at Financial Research Associates. Fishman has been on the Institute’s faculty for 32 years. “The award is special to me as Stephen Kolodny was the moving force behind the Institute,” Fishman tells BVWire. “To me, he was a mentor and a friend. I am humbled to have been chosen for such an award.”

For more information on the Institute, click here.

New edition of cannabis valuation book now in BVResearch Pro

The second edition of The Cannabis Industry Accounting and Appraisal Guide is now available to subscribers of the BVResearch Pro platform. The book provides useful information for appraisers and accountants about the unique financial aspects and intricacies related to businesses operating in this area. A notable highlight of the book is a sample risk assessment framework and appraisal report tailored to the unique demands of the cannabis industry. The book’s authors are Ron Seigneur, Stacey Udell, and Brenda Clarke, and there are a number of contributors. If you are not a subscriber to BVResearch Pro, you can purchase the book if you click here.

Reminder: BVR’s benchmarking survey still open

Every business valuation firm or practice should want to know how to improve their operations, processes, and output. That’s why you should join BVR’s 15-year effort to help understand what makes a good BV practice a great one. The BVR Benchmarking Survey collects data on operations, financial metrics, compensation, staffing, marketing, billing, tools and resources used, and more. The survey is open until June 30, and the direct link is bvresources.com/2023bvsurvey. We thank those of you who have already participated!

ASA announces election results

The American Society of Appraisers (ASA) has announced the results of its 2023-2024 elections for new international officers, board of governors and discipline committee officers, and members at-large. Those elected will officially take office on July 1, 2023. International officers are:

• International president—Garrett Schwartz, ASA;

• International vice president—G. Adrian Gonzalez Jr., ASA; and

• International secretary/treasurer—William Engel, ASA.

For the business valuation discipline, the results are:

• BV chair—two-year term, one open seat: Ronald Seigneur, ASA;

• BV vice chair—two-year term, one open seat: Arlene Ashcraft, ASA BV;

• Secretary/treasurer—two-year term, one open seat: Laurie-Leigh White, ASA, CEIV™, IA; and

• BV Discipline Committee members-at-large—three-year term, four open seats: Jaclyn Franks, ASA; P.J. Patel, ASA; Adam Smith, ASA, IA; and Jonathan Tang, ASA, IA.

The full list of results for all disciplines is available if you click here.

IVSC’s Darling talks about IVS update

Everyone interested in valuation should take the opportunity to participate in shaping the future of International Valuation Standards to ensure that they continue to reflect best practices globally, says IVSC Chair Alistair Darling in an article. These standards, developed through international cooperation, affect a broad spectrum of financial activities, from financial reporting and corporate finance to investment analysis and public policy decisions. Darling extends a “warm invitation” to contribute your voice to the process by offering feedback on the latest exposure draft outlining proposed updates to the IVS. To download the draft, click here. The public comment period will end July 28.

CBV Connect conference June 8-9

BVWire will be attending the CBV Connect 2023 June 8-9 in Toronto, hosted by the CBV Institute, Canada’s valuation professional organization (VPO) and standard-setter. Some of the topics of note include valuation in the metaverse, automated valuation models, the role of financial experts in ESG litigation, a “ladies of litigation” panel on damages, and much more. The event will be in-person and livestreamed. For details, click here.

BV movers . . .

People: Elena Mavliev, Ph.D., CFA, has joined Houston-based Weaver as director, valuation services, in the firm’s expanding West Coast market; she has more than 20 years of domestic and international valuation experience, including five years with a Big Four firm where she directed several cross-functional client engagement teams in Eastern Europe, Russia, and Asia … Michael Shekel, CPA/ABV, has joined FORVIS as a managing director with the firm’s forensics and valuation team and he will focus on expanding the firm’s valuation services in the Washington, D.C., metro market; he has more than 20 years of experience, focused primarily on valuation services with an emphasis on middle-market business development companies, private-equity funds, and real estate entities.

Firms: Houston-based Weaver is adding HKG LLC of Pasadena, Calif., a firm with 65 professionals, including seven partners, which provides audit, tax, and accounting services to clients across an array of industries including private equity, healthcare/life sciences, manufacturing and distribution, real estate, media, professional services, early-stage and emerging growth companies, and not-for-profit … Elk Grove Village, Ill.-based Porte Brown LLC is adding RVG Partners LLC of Oak Brook, Ill., a firm that provides accounting services, audits, reviews and compilations, business succession planning, financial forecasts and projections, and tax and consulting services to a wide variety of individual and business clients … Cleveland-based HW&Co. has acquired ECS Billing & Consulting South Inc. (d.b.a. ECS Solutions) of Dublin, Ohio, which provides billing, revenue cycle management, and consulting services to the skilled nursing, home health, and hospice markets … Edina, Minn.-based Abdo LLP is adding HG&K Ltd. of Minnetonka, Minn., a firm with three partners and 16 staff members that provides accounting and advisory services to a broad range of businesses and organizations, specializing in the construction, real estate, manufacturing, professional services, and nonprofit industries.

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

CPE events

• Understanding Control vs. Lack of Control and Applicable Discounts, June 8, 10:00 a.m.-11:40 a.m. PT/1:00 p.m.-2:40 p.m. ET. Featuring: Carla Glass (Marcum LLP) and Marissa Turrell (Marcum LLP). CPE credits: 2.0.

This is a refresher course on premiums and discounts related to control (or lack of it).

• Calculating But-For Profits, June 13, 10:00 a.m.-11:40 a.m. PT/1:00 p.m.-2:40 p.m. ET. Featuring: Stacey D. Udell (HBK Valuation). CPE credits: 2.0.

This is a session on damages that will discuss calculating the position the harmed party would have been in “but for” the alleged acts, which is an advanced skill for appraisers.