In “25 Hot Tips in 75 Minutes,” one of the most popular panels at the recent AAML/BVR National Divorce Conference in Las Vegas, attorneys and valuation experts shared tips on how to succeed in litigation as well as in managing client relations and workflow.

This session, moderated by attorney David Levy (Berger Schatz), illustrated how attorneys and experts can benefit from a joint conference. For one, it showed how a tip may be smart from the valuator’s perspective but may raise issues for the attorney and vice versa. It also made clear that many of the strategies the practitioners proposed are applicable in any practice area, not just in the divorce context. Here’s a sample.

Fee disputes: Few financial experts (and attorneys) are able to avoid fee disputes with litigants. Worse, a dispute can easily escalate into a professional negligence suit against the appraiser. Appraiser Tracy Katz (Gursey Schneider LLP) suggests that, to minimize the risk, include language in the firm’s engagement letter with the litigant that fee disputes will go to arbitration and that the client must raise malpractice claims during arbitration, as an affirmative defense. Her firm asks the litigant and the retaining attorney to sign the agreement. If the litigant still insists on suing in state court for malpractice, the appraiser will introduce the arbitration agreement in that proceeding against the litigant to argue the malpractice claim is barred. According to her, the California Court of Appeal found the arbitration agreement valid and enforceable (in an opinion that’s not citable).

But the tip raised some questions. Does this approach negatively affect the attorney-client relationship? Can the client sue the attorney for cosigning the engagement letter that governs relations between the litigant and the appraiser?

Financial affidavit: Attorney David Griffin (Rutkin, Oldham & Griffin) suggests annotating financial affidavits. By using footnotes, the attorney may be able to engage in a subtle form of advocacy on the client’s behalf. For example, the notes may propose to the court what money is or is not available as income for the determination of spousal or child support.

An audience member pointed out, however, that the opposing side may challenge the admissibility of this type of affidavit in a motion in limine.

S corp tax affecting: All valuators, no matter their area of expertise, must know the recent Kress gift tax decision, says appraiser Jim Hitchner (Financial Valuation Advisors). The importance of Kress cannot be overstated because, for the first time, all the valuation experts (including the expert testifying for the government) applied a C corporation tax rate to value a very successful family business that was organized as an S corporation. The court, without ado, accepted the practice. Regardless of the precise precedent value of the court’s decision, valuators and attorneys should use it as persuasive authority in any S corp-related valuation case, the appraiser says.

A recording of this session (along with selected other sessions) will be available soon from BVR. Stay tuned for more conference coverage in the coming weeks here and in
Business Valuation Update. A digest of Kress v. United States, 2019 U.S. Dist. LEXIS 49850, 2019 WL 1352944, and the district court’s opinion are available at BVLaw.

Eatery multiples in latest Duff & Phelps report

Publicly traded quick service restaurants had a mean multiple of 16.5x (enterprise value as a multiple of EBITDA) in 2018 and are estimated to achieve a multiple of 16.8x in 2019, according to the “Restaurant Quarterly Update—Spring 2019” from Duff & Phelps. The report examines other restaurant types and analyzes same store sales (SSS) and M&A activity. March 2019 SSS increased by 1.2%, while comparable traffic fell by 1.8%. Average guest checks were up 3.1% in February, helping to mitigate the drop in traffic. The 2018 annual growth of 0.7% represented the strongest sales growth rates for restaurants in the past three years, the report says.

New edition of ASC valuation survey released

Valuation multiples for controlling interests in ambulatory service centers (ASCs) are increasing, according to the “2019 ASC Valuation Survey” from HealthCare Appraisers Inc. In the 2018 survey, no respondents observed average valuation multiples of 8.0x or greater for controlling interests in single-specialty ASCs, as compared to 24% this year, the survey says. Over half (56%) of respondents indicated they are observing valuation multiples of 8.0x or greater for controlling interests in multispecialty ASCs, as compared to 7% of respondents from the 2018 survey. For this new edition, HealthCare Appraisers Inc. collaborated with members of the Ambulatory Surgery Center Association (ASCA) to enhance participation. ASC management companies, health systems, as well as ASC investment bankers and business brokers determine trends in the value of ASCs. The data compiled represent over 1,000 ASCs throughout the country.

The American Society of Appraisers has launched its second annual offering of the Rising Stars, an award that honors the brightest valuation professions, age 40 and under, who have demonstrated success over the past fiscal year. The nominee should have demonstrated leadership and exemplify commitment to his or her profession and contributed in growing the profession’s outreach, acceptance, and authority. Nomination forms must be submitted by Sunday, June 30.

Willamette gives insights into shareholder litigation

The Spring 2019 Insights from Willamette Management Associates focuses on shareholder litigation and is edited by Kevin M. Zanni. Some of the articles are: “Standards of Value and Fair Value Decisions in the Chancery Court” (Kevin M. Zanni and Chad M. Kirkland), “Valuation Discounts in Dissenting Shareholder Appraisal Rights and Shareholder Oppression Claims” (Matt C. Courtnage), “Post-Acquisition Disputes: Working Capital Adjustments and Working Capital Disputes” (George Haramaras), “Confronting Behavioral Bias in Financial Projections” (Kyle J. Wishing and Ben R. Duffy), and more.

Valuation gap for financial planners in Australia

There is a wide gap between what buyers are prepared to pay for high-quality financial planning practices in Australia and those that are considered “conventional,” reports Radar Results, an M&A expert that specializes in the financial services sector. Over the past 10 years, financial planners have been able to sell their practices for a recurring revenue (RR) multiple of between 3.0x and 3.2x. If the practice was considered less than high quality, they would still receive a price multiple of between 2.5x and 2.7x the RR, according to John Birt of Radar Results. These practices are now selling for between 1.5x and 2x the RR, and the grandfathered clients are selling for between 0.5x and 1x. Therefore, the difference today between the valuation of a high-quality financial planning practice compared to a conventional one is possibly up to 1.5x the RR, he says in an interview. Regulatory changes, such as new mandatory education requirements, have contributed to the valuation gap.

RICS debuts its BV Symposium in New York City June 3

BVWire looks forward to attending the first RICS Business Valuation Symposium, a half-day event that will examine such issues as recent changes that impact global trends in valuation, fair value measurement estimates and challenges in financial reporting, how the community is responding to the new quality monitoring program, and whether advances in technology will necessitate further changes. Speakers include Anthony V. Aaron (University of Southern California), Jay E. Fishman (Financial Research Associates), Mark Zyla (Acuitas Inc.), Adam Smith (PwC), Leigh S. Miller (Ernst & Young), Cindy Ma (Houlihan Lokey), PJ Patel (Valuation Research Corp.), and other notable profession leaders. After the sessions, BVR’s CEO David Foster will be the featured speaker at a networking reception. We hope to see you there!

BV movers...

People: Luis A. Argueso and Andrea M. Ferrari, JD, MPH, have been named partners at Boca Raton, Fla.-based HealthCare Appraisers Inc. … Noam Hirschberger, CFA, CVA, director of valuation services at PKF O’Connor Davies, New York City, was appointed to serve as the leader of the firm’s new cannabis industry practice area … Eric Miles, CPA, CFE, CFF, CIA, has been named the new managing partner of the consulting practice at Seattle-based Moss Adams; he will lead the firm’s numerous consulting lines, including information technology, specialty tax, transactions, valuation, wealth management, and other consulting services … Outgoing Deloitte CEO Cathy Engelbert has been named the commissioner of the Women’s National Basketball Association (WNBA).

Firms: Bloomfield Hills, Mich.-based Cendrowski Corporate Advisors has a new alliance with Ron Braver and Associates LLC of Chicago that adds to the firm’s investigative, antifraud, money laundering, internal investigations, and asset forfeiture capabilities; Braver is a former special agent of the criminal investigation division of the IRS … Chicago-based BDO USA LLP expands its foothold in the Philadelphia area while expanding its advisory offerings with the acquisition of AC Lordi of Malvern, Pa., effective June 1; the addition brings 100 professionals to BDO plus AC Lordi CEO Frank Lordi and the firm’s six other principals, who will become BDO partners … Roanoke, Va.-based Brown Edwards has acquired two practices of Richmond, Va.-based Cherry Bekaert effective June 1; this involves the Roanoke, Va., and Lynchburg, Va., practices, which have 15 partners and 92 professional staff between them.

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

Upcoming BVR training events

• Cannabis and Hemp: Valuation and Industry Update (May 28), with Ronald Seigneur (Seigneur Gustafson LLP) and Ryan Cram (Seigneur Gustafson).
  
  Business valuations and damages assessments are in demand in the high-growth cannabis and hemp industry. This webinar will discuss the many “must know” considerations that impact engagements in this highly regulated industry.
  
  

• Clawbacks and Creditors: The Valuators Role in Bankruptcy (May 30), with Pasquale Rafanelli (Deiters & Associates LLC).
  
  Learn the fundamentals of performing valuations for bankruptcy, including the analytical issues that practitioners face as well as practical tools and tips to use when performing a valuation for troubled companies.

Holiday Break
BVWire will not be published next week due to the Memorial Day holiday.
We will return on June 5. Have a happy and safe holiday!