Some surprising takeaways from the VSCPA BV conference

The Virginia State Society of CPAs held its 22nd annual Forensic and Valuation Conference. Harold Martin (Keiter) chaired the two-day conference and acknowledged the help of a task force in putting the event together. The sessions and speakers were top-notch, and some of the takeaways from the first day’s sessions may surprise you.

• There is “a ton” of BV work out there (“we’re turning business away”), but the trouble is finding talent—there’s a big shortage of qualified people, so firms need to ramp up recruiting;

• In BV, you can “never be wrong” because different (and opposing) approaches can be supported—the key is what is “right for you”;

• The “dirtiest little secret” in BV is that there is no real due diligence done on client-provided projections;

• Small businesses will often have unreported income, but it may be too costly to uncover it, so consider a high-level lifestyle analysis;

• The main sources of economic data (Mercer, BVR, Tagnify, and KeyValueData) all have “great information,” but they all need more endnotes and citations (and watch out for questions from opposing counsel on whether you have verified the data);

• Eyes are on the Trump legal case regarding manipulation of asset valuations—practitioners want to know who valued the FLPs at issue;

• There’s a certain amount of truth to the idea that, if enough people do something wrong, it becomes “generally accepted”;

• Some courts will not like or understand your DCF analysis, so just convert it to a CCF using a “blended” growth rate (conceptually, the DCF and CCF should result in the same value); and

• There’s a potential opportunity for valuation experts to specialize in reasonable compensation outside of business valuation (e.g., for tax cases).

There will be in-depth coverage in a future issue of Business Valuation Update

Hitchner on citing BV books and cases

It’s fine to cite authoritative texts in your report—but court cases are another story, advises Jim Hitchner (Financial Valuation Advisors). He spoke at last week’s Forensic and Valuation Services Conference hosted by the New Jersey Society of Certified Public Accountants (NJCPA).

Big three: Hitchner pointed to the three main texts in the BV profession: Valuing a Business (by the late Shannon Pratt), Gary Trugman’s Understanding Business Valuation, and his own Financial Valuation Applications and Models. He has cited all of these resources in his reports when appropriate, pointing out that the Pratt book has just come out with its new sixth edition (done by a group of contributors). The Trugman book is “very different in style and tone” and is “full of good stuff,” he noted. Hitchner also said he is working on the fifth edition of his book, which is scheduled to come out in the first quarter of 2023. All of these books are available from BVR.

Cases: As for court cases, they should not be cited, he advised, but there are exceptions. If the attorney advises that the jurisdiction has an important case that is used as precedent for a certain valuation approach or methodology, citing that case may be appropriate. And, of course, the Mandelbaum case is fine to cite in your DLOM section.

The NJCPA conference, hosted by Roy Kvalo, director of litigation and valuation services at The Churchin Group (Red Bank, N.J.), was excellent, and we’ll have more coverage in future weeks.

Divorce courts getting flexible on valuation dates

One of the interesting points made at the recent AAML/BVR National Divorce Conference was that judges in marital dissolution cases now tend to want more current valuations, particularly when subsequent events may have impacted value. Of course, this can happen as a result of the pandemic. A trial could have started at the outset of the pandemic and then postponed. By the time the trial starts up again, the business could have been materially impacted, rendering the valuations too outdated in the eyes of the trier of fact. Therefore, some of them are abandoning the valuation dates set by precedent and asking for more current valuations.

If you missed the BVR/AAML conference, BVR will be offering recordings of all the sessions. We’ll let you know when they are available.

Moran adds to videos aimed at attracting young BV practitioners

Ray Moran (FON Valuation Services), the marketing director of the International Institute of Business Valuers (iiBV), continues to add to his series of interesting videos designed to spark interest in younger individuals and university students about a career in valuation. In a recent video, he interviews Mei Mahila about her career path from finance student in Albania to BV practitioner. Her corporate finance professor got her interested in valuation, and she entered the Valuation Olympiad, a competition in London sponsored by Global Banking Training. She’s now a manager with Deloitte and offers some valuable advice to the profession on how to attract young people to careers in valuation. One way is to reach out to students and show them personal stories such as hers to demonstrate what can be achieved in the profession. Also, stress the fact that people from all types and levels of educational backgrounds—not just finance and accounting—can be very successful in valuation, such as people with engineering, science, or math backgrounds. The iiBV’s YouTube channel is at: youtube.com/channel/UC6CmU7fWmRk0OzF__mmuKOA.

RMA is the financial benchmarking data of choice, per BVR survey

Over three-quarters (78%) of valuation experts say they use RMA for financial benchmarking data, according to a recent survey by BVR. Coming in second is Bizminer, cited by 28% of respondents (see below). Just over 50 practitioners responded to this survey.

The “Other” category includes a number of resources, most of which just a single respondent cited, including IBISWorld, Cap IQ, S&P Global Intelligence, Business Reference Guide, Vertical IQ, and trade association data. Also, the majority (80%) only use one resource, and most of the respondents say they use these data weekly.

In a 2018 BVR survey (which had 160 respondents), IBISWorld was No. 1 (cited by 57%) and RMA was second (at 47%). We have heard that IBISWorld has had some reliability issues, so that may partly explain the drop in its use.

IVAS-IVSC conference this week: October 6-7

The leading business valuation conference in Asia Pacific has been the IVAS-IVSC Business Valuation Conference, and the next one will be October 6-7. Environment, social, and governance (ESG) factors as well as intangible assets are a major part of the agenda, and the conference theme is “Reframing Valuations: Intangibles, ESG, and Long-Term Value.” The event is organized by the Institute of Valuers and Appraisers, Singapore (IVAS) in partnership with the International Valuation Standards Council (IVSC). For more information and to register, click here.

BV movers . . .

People: Shaun Maloney, CPA, CGMA, ABV, CEIV, CFF, CFA, has been admitted as a partner at New York City-based Mazars; he has over 13 years of experience specializing in valuing businesses, intangible assets, and other complex financial instruments and is a past recipient of the AICPA’s Standing Ovation Award … The CBV Institute (Canada’s valuation professional organization) would like to congratulate Drew Dorweiler, FCBV, FRICS, CPA, ABV, ASA, CVA, CBA, CFE (IJW & Co. Ltd.), on his appointment as chair of the Membership and Standards Recognition Board (MSRB) at the International Valuation Standards Council (IVSC); the MSRB brings together senior leaders from the world of valuation, including people from VPOs, academic institutions, and government departments, and works with stakeholders across all markets to promote recognition and encourage adoption of IVS.

Firms: Troy, Mich.-based Rehmann LLC is adding Vestal & Wiler of Orlando, Fla., a firm that provides tax, audit, and advisory services to primarily middle-market companies, including owner-managed, family-owned, and private equity-backed entities throughout the Orlando area … Seattle-based Moss Adams LLP has acquired Kurtz & Co. PC of Richardson, Texas; the acquired firm provides accounting, tax, compliance, and planning services for domestic and foreign partnerships, limited liability companies, and corporations, with a strong focus on real estate … Chicago-based Baker Tilly will add True Partners Consulting LLC, also based in Chicago; the acquired firm has 210 professionals who specialize in high-end tax services, with a particular focus on technology startups, and public and private enterprises.

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

CPE events

• Unique Challenges in Valuing A/E Firms With an Industry Update, October 11, 10:00 a.m.-11:40 a.m. PT/1:00 p.m.-2:40 p.m. ET. Featuring: Kevin R. Yeanoplos (Brueggeman and Johnson Yeanoplos PC). CPE credits: 2.0.

This session will provide insights on value drivers for architectural and engineering firms and the status of the industry.

• Valuation Considerations in High Inflationary Environments, October 18, 10:00 a.m.-11:40 a.m. PT/1:00 p.m.-2:40 p.m. ET. Featuring: William E. Harris (Trugman Valuation). CPE credits: 2.0.

Valuation analysts now have to consider macroeconomic factors that have not been present in the US economy in over 20 years. This webinar will include a discussion of how high inflationary periods have impacted stock market valuations in previous years and what this means for valuations of closely held companies in the current economic environment.