BVWire Issue #188-4 | May 23, 2018


AICPA releases draft of PE/VC guide

After several years in the works, the AICPA has issued a draft Accounting and Valuation Guide” that provides “nonauthoritative guidance” for valuing private equity and venture capital investments. It 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.

Where to focus: The guide has 14 chapters, many examples, and a number of appendices. Valuation experts should pay particular attention to the background on the industry in Chapter 1. Also of interest is the material in Chapter 4, “Determining the Unit of Account and the Assumed Transaction for Measuring the Fair Value of Investments,” which sets the context for the valuation and gives examples. Chapters 5 to 9 also deal with valuation, and especially of interest is the discussion on premiums and discounts in Chapter 9 (“Control and Marketability”). Also, you should check out Chapter 10, “Calibration.”

Comments on the working draft are due August 15, and you can email them to Yelena Mishkevich ( All comments will be kept confidential and will not be posted on the AICPA website.

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‘Does new bonus depreciation apply to intangibles?’

That was a question from the audience at the ASA/USC 13th Annual Fair Value Conference held May 10 in Los Angeles. “No, it does not apply to intangible assets,” said Milind Shah (KPMG), who co-presented a session with Will Frazier (Stout) on the Tax Cuts and Jobs Act. The new tax law’s provisions on immediate expensing and bonus depreciation have “not been talked about enough,” said Shah. Under the new law, businesses may take 100% bonus depreciation (immediate expensing) on qualified property both acquired and placed in service after Sept. 27, 2017, and before Jan. 1, 2023. Beginning in 2023, bonus depreciation is phased out by 20 percentage points each year, until it is fully eliminated in 2027.

What to do: Extend the DCF model to properly capture the impact of these changes on cash flow in annual projections as well as the terminal year. A separate analysis of the cash effects of the tax change can be done as a subset of the overall DCF analysis.

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Firms expect significant valuation effects from tax reform

Tax and finance executives were asked the following question during a recent KPMG webinar: How significant do you expect the effects of tax reform to be on valuations performed for your business? Answers (from 679 respondents): very significant, 21%; somewhat significant, 58%; and not significant, 22%.

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BIZCOMPS data update

The average selling price in 2017 for small private companies was $444,000 (excluding inventory), based on transactions in the BIZCOMPS database. The Spring 2018 issue of the BIZCOMPS®/BVR Deal Review™ also reports that the average annual gross sales for transacted businesses in 2017 were $1.034 million. Companies with annual gross sales greater than $700,000 have a median sale price-to-annual gross sales multiple of 0.32 and a harmonic mean multiple of 0.20 for 2017 transactions. This size firm has a median sale price to seller’s discretionary earnings of 2.21 and a harmonic mean multiple of 1.72. There are over 12,000 transactions in BIZCOMPS, which focuses on small-company “mom and pop” or sole proprietorship transactions, the majority of which are for firms with less than $500,000 in gross revenue.

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Grappling with unprecedented change

A report from Deloitte UK’s Economics, Valuation and Modeling practice says that, in an era of unprecedented change, many market participants are grappling with strategic business and valuation-based decisions arising as a result of increased innovation and greater market controversy, uncertainty, and volatility. Deloitte UK has brought together industry specialists to share thoughts on a number of topics relevant to businesses—now more than ever—in innovative, uncertain, and volatile times.

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Data and analytics in the M&A process

The use of data and analytics has taken on a particular importance in M&A and, when used properly, can transform the due diligence process, says a report from KPMG. It describes one case where limited conventional information hindered a brand valuation. The problem was solved using specialty tools and social media information to get a better picture of brand strength, distribution channels, and sell-through metrics.

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New edition of book on valuation for M&A

Now in its 3rd edition, Valuation for M&A: Building and Measuring Private Company Value lays out the steps for measuring and managing value creation in non-publicly traded entities. The book, by Chris Mellen and Frank Evans, gives insights on the optimum strategy to enhance both market value and strategic value and maximize return on investment. The book focuses on private companies in the lower end of the middle market (i.e., those generating between $3 million and $250 million in value).

Extra: Listen to Mellen discuss the concepts in this book in a BVR webinar, Valuation for M&A, today (May 23) from 10:00 a.m.-11:40 a.m. PT/1:00 p.m.-2:40 p.m. ET.

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Help needed with some academic research

Researchers at the University of Wisconsin School of Business are conducting a survey, “Valuation Practitioners’ Opinions About Various Professional Topics,” as part of their ongoing study of fair value. Please take five to 10 minutes to take the survey, which can be done in one session. Your responses will be confidential, and neither your name nor any other identifiable information will be recorded. All data collected will be stored on secure servers within the Wisconsin School of Business and accessible only by the principal investigator. You can also enter a drawing for a $50 electronic Starbucks gift card. If you have any questions, there is contact information in the survey introduction. Please click here for more details and to take the survey. Thanks in advance for your help!

Extra: We will shortly be providing the results from other similar surveys the researchers have already completed, so stay tuned!

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Registration opens for ASA Advanced BV Conference

You can now register for the Joint ASA 2018 Advanced Business Valuation and International Appraisers Conference being held in Anaheim, Calif., on October 7-10. There’s an early-bird discount of $100 for in-person attendance if you register before June 15. You can also register for live streaming if you can’t attend in person. There are also some preconference education sessions, such as a two-day workshop on attacking and defending an appraisal in litigation, a three-day prep class for the CEIV credential, and four-day BV201 and BV203 classes. This is one of the must-attend BV events of the year, and you can check out the agenda and register if you click here.

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Global BV News

EFRAG looks at intangibles

The European Financial Reporting Advisory Group (EFRAG) has begun a consultation on its research agenda and is considering a project to develop alternatives to provide more relevant information on intangibles. The EFRAG Secretariat considers that a preliminary analysis of the gap between market valuations and accounting equity would provide good insights for the project by, for example, providing evidence of whether this gap is more commonly found in specific industries. The project is likely to:

  • Address a number of aspects in relation to internally generated intangibles. First, it could consider and describe the different categories (marketing, technological, social, and reputational) and how their different features are relevant in terms of financial reporting.
  • Investigate how to take into consideration uncertainties in relation to these elements, especially when they cannot be protected legally, or competitors can duplicate them. Uncertainties can exist both in relation to the entity’s ability to access future benefits, and its amount/timing.
  • Develop metrics to express earnings potential and value. These metrics may not be fit as a measurement basis but could be used to disclose information in the notes to the financial statements.

A number of initiatives, such as the World Intellectual Capital/Asset Initiative, have already taken steps to improve the reporting in this area. An important part of the EFRAG research project would be to investigate and leverage these other initiatives for financial reporting.

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BV movers . . .

People: Robert A. Ranallo, leading partner in Skoda Minotti’s Valuation and Litigation Advisory Services Group, has earned his CPA designation in the state of Florida; he also has ABV, JD, CVA, and CFF credentials in addition to a CPA designation in Ohio … The Whippany, N.J., office of WithumSmith+Brown PC announced that Kathy Ruggieri has joined it as a principal and team member in the Healthcare Services Group … Among the individuals at Dixon Hughes Goodman promoted to partners and principals effective June 1 include Richard Livingston (Forensics & Valuation Services, Charleston, S.C.) and Dennis McLister (Transaction Advisory Services, Tysons, Va.).

Firms: Woodbury, N.Y.-based Gettry Marcus CPA is doing a major expansion of its consulting practice, which encompasses business valuation among other services; it will also start offering free quarterly webinars to clients … Springfield, Mo.-based BKD LLP will acquire a portion of the Wichita, Kan., audit and tax practices at Chicago-based Grant Thornton LLP effective June 1 … Expanding its reach in Arkansas, the Little Rock office of Thomas & Thomas LLP and Fort Smith, Ark.-based Beall Barclay & Co. PLC will merge their practices in 2018 … New York-based Marcum LLP’s executive recruiting and temporary staffing affiliate Marcum Search LLC is launching a new division focused exclusively on recruiting for human resources … Chicago-based BDO USA LLP will expand its Wisconsin practice through the addition of 85 staff, including 15 partners, from Smith & Gesteland LLP of Middleton, Wis., effective July 1 … Sax LLP has growing pains and is expanding its flagship office in Clifton, N.J.

Please send your professional and firm news to us at

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CPE events

  • Valuation for M&A (May 23), with Chris Mellen (Valuation Research Corp.)

    A discussion of the metrics needed to measure company value, maximize that value, determine return on investment, and how value depends on the many exit options available to business owners.
  • Healthcare Valuation 101 (May 31), with W. James Lloyd (PYA) and Kathryn Culver (PYA).Part of BVR’s Special Series presented by the BVR/AHLA Guide to Healthcare Industry Finance and Valuation.

    If you are interested in providing valuation services within the healthcare sector, you won’t want to miss this session.
  • Solvency Opinions: Legal Insights and Best Practices for Valuation (June 5), with Craig Jacobson (GlassRatner) and Stephen Selsbt.

    The issue of solvency continues to be a hot topic in the world of valuation and litigation. Whether a company was or would be solvent under certain circumstances can have a significant impact on corporate transaction and litigation strategies.

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New and Trending
LinkedIn Discussions

BV Experts Clash Over Statistics

The “Value” of Beer—and Breweries—Is Rising!

Q&A With Jim Harrington on the Duff and Phelps Cost of Capital Navigator

Your discussion could be featured here—BVR's LinkedIn group is a place for valuation professionals to share, discuss, and learn about compelling BV topics. If you're not already a member, request to join:

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Holiday Break

BVWire will not be published next week due to the Memorial Day holiday. We will return on June 6. Have a happy and safe holiday!

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

PE/VC guide

Bonus depreciation

Tax reform effects


Big changes

M&A analytics

Valuation for M&A

Research help

ASA Advanced BV

Global news

BV movers . . .

CPE events

LinkedIn discussions



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