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BVWire is your go-to source for the latest in the business valuation profession. Highlights for this week include:
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Ideas from the trenches on growing your BV practice
Growing the practice is the single most critical issue currently facing business valuation firms or practices, according to our latest “Two-Minute Practice Builder” survey. A third of respondents cited that issue as most critical, followed by finding and retaining good staff (27%) and quality control of work output (13%). Other top concerns include keeping up with the volume of work and technology/automation issues (see graph below). On the list but not cited by any respondents were cost control, competition from low-cost providers, and keeping up with valuation standards. This is not to say that these are not matters of concern, but they were not the choice for the No. 1 spot.
Most Critical Issue Facing Your BV Firm or Practice
Growing the firm/practice 33%
Finding and retaining good staff 27%
Quality control of work output 3%
Keeping up with the volume of work 7%
Technology and automation 7%
Other (sales and growth concerns) 13%
The “Other” category included mostly sales and business development issues, which could be reclassified as growing the firm, making that issue more prominent than the survey results show.
Some ideas: The survey asked for strategies they were using to grow the practice, and they include:
- Increased spending on marketing and in-person networking;
- Expanded into different geographies and product segments;
- Came up with a specialized valuation tool as a marketing strategy;
- Joined a local organization of professionals in the gift/estate tax area to expand in that niche;
- Got more aggressive on pricing;
- Became nimbler and more flexible in marketing;
- Built up referral network through in-person meetings with referral sources; and
- Advertised in strategic publications in targeted geographical markets.
One respondent, clearly a person of few words, simply said: “Outsourcing, baby!”
Our thanks to those who participated, and we’ll have another survey in next week’s issue. |
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Another ESOP valuation mess
Pilots for Western Global Airlines, a freight carrier, reached a $14.5 million settlement to end a lawsuit alleging that the owners and fiduciaries overvalued the company by 20 times its actual worth when setting up its employee stock ownership plan (ESOP). The company took on debt to finance the transaction, and it eventually landed in bankruptcy court. The Department of Labor estimated that the owners wrongfully pocketed about $182 million from the ESOP deal because of the inflated value. The owners denied all allegations, saying they “relied upon exceptionally qualified experts and advisors,” according to a Law360 report. We have a copy of the settlement and will post it when the court approves it (our thanks to Jim Joyner for alerting us to this case.)
In August, the DOL prevailed in a lawsuit against a company for the same reasons—overvaluing the company’s stock it sold to its ESOP. The ESOP trustee was also charged but settled before the trial. The court wrote a devastating opinion that raked the company’s owners, advisors, and valuers over the coals. |
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More than a few valuers say AI will bring ‘significant’ changes
There were a number of sessions on artificial intelligence at the ASA International Appraisers Conference in Portland, Ore. In one session in the business valuation track, attendees (about 100) were polled on their use of AI at their practices. About three-quarters (73%) of those responding say they have used it to some extent, with most just dabbling out of curiosity. One in 10 said they were using it for specific tasks as part of their work, mostly for research, report writing, and marketing. Almost all said it will have an impact, with 40% saying that it will “significantly change” how valuation work is done. These results largely track prior surveys we’ve done or seen on AI usage at valuation firms. You can read more on this session and a few others in a blog post by BVLaw editor Jim Alerding, who attended the conference. |
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‘Tell me why,’ say young practitioners
An interesting session at the two-day Forensic and Valuation Conference held by the Virginia Society of CPAs (VSCPA) discussed staffing and retention issues. One member of the panel, a young practitioner, said she jumped ship because the valuation work she was doing “wasn’t interesting.” She later realized that the work was indeed interesting, but the problem was that she was never told why she was doing it—she had no context.
This is a plea we’ve heard before from young practitioners. Senior firm members need to explain to their junior colleagues why things are done the way they’re done. And don’t wait until they ask the question because they may not feel it’s appropriate to ask. When they do ask, don’t take it as being confrontational but rather because of them just being in the dark. Their questions should be welcomed, and they may also trigger some second thoughts about why some valuation methods have perpetuated, possibly because of inertia or that it’s the way everyone else does it. Questioning the status quo is a good thing.
More details on the VSCPA conference will be in an upcoming issue of Business Valuation Update. |
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Keurig penalty illustrates practice opportunity regarding ESG fraud
At the recent ASA International Appraisers Conference in Portland, Ore., Carla Nunes (Kroll) discussed ESG matters and mentioned the recent $1.5 million fine Keurig paid to settle SEC charges that the company falsely claimed that its K-cup pods were recyclable.
Last year, we alerted readers to emerging “nonfinancial reporting fraud” in the area of environmental, social, and governance (ESG) that represents an opportunity for valuation experts and forensic accountants to conduct risk assessments on their subject companies. Many companies have no ESG internal controls and, in the U.S., ESG standards have mostly been voluntary, creating opportunities for fraud. Companies are under pressure to be ESG-compliant, which can lead to greenwashing (making misleading claims about ESG-related efforts).
For more information on this type of fraud, see Managing Fraud Risks in an Evolving ESG Environment, from the Association of Certified Fraud Examiners (ACFE) and Grant Thornton.
More details on the ASA conference will be in the November issue of Business Valuation Update. |
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Private-company EBITDA multiples continue upward trend
EBITDA multiples across all industries reached their peak in the third quarter of 2018 (at 5.0x) and then dipped until the second quarter of 2022, according to the latest issue of the DealStats Value Index (DVI). Since then, EBITDA multiples have generally been trending upward, reaching 4.8x in the second quarter of 2024 (see the graph below). The EBITDA multiple is the median selling price/EBITDA with trailing three-quarter average.
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DealStats Value Index is a quarterly publication exclusively for DealStats subscribers. It provides trend information on valuation multiples and profit margins for transactions in DealStats, including multiples and margins by industry sector, interquartile range by sector and year, multiples and margins for private vs. public, and much more. If you are a subscriber to DealStats, you can download the current issue to see all the latest transaction trends if you click here.
Extra: DealStats now includes a Pure Play MVIC price enhancement feature that allows you to view adjusted selling prices and multiples comprised of fixed assets and intangibles only. |
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Two specialty ASA BV conferences coming up
Mark November 21 on your calendar for the Litigation in Valuation Conference from the American Society of Appraisers (ASA). This is the second year for this conference, and it will be a virtual, half-day event that will focus on recent trends and relevant cases in various practice areas, reasonable compensation, and how to explain cost of capital to a judge or jury. You can check out the agenda if you click here. Up to five hours of CE credit are available.
Then, on December 5 is the winter edition of the ASA Fair Value Virtual Conference, which will include an ASC 360 panel, an update on the AICPA business combinations guide, calibration, company-specific risk, and more. The event offers up to five hours of CE credit. For more details and to register, click here. |
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Reminder: Take IVSC survey on legal aspects of valuation
If you are a valuation professional who offers litigation support services or a legal professional involved in valuation matters, please take a survey designed to gather feedback on the legal aspects of valuation practices worldwide. To take the survey, click here. The survey, from the International Valuation Standards Council (IVSC), is still open at the time of this writing and will capture insights on potential engagement topics and partnerships, which will inform IVSC’s efforts to collaborate with the legal and judicial communities. Your input will support the development and advancement of International Valuation Standards (IVS) and valuation professionalism in this domain, promoting consistency and professionalism for the public good. |
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BV movers . . .
People: Charles Henrikson has been promoted to principal at Cornerstone Research; he is in the firm’s Silicon Valley, Calif., office and leads teams in complex securities litigation and valuation matters and has over a decade of experience consulting with clients and supporting experts in federal and state courts, including California state court and the Delaware Court of Chancery … Several promotions at Nathan Wechsler & Co. PA, based in Concord, N.H.: Brady Wentworth, CPA, CVA, has been promoted to manager; he has been with the firm since 2019 and has provided services related to compliance, financial statement preparation, tax return preparation, and special projects; and Nathan T. Bulluck, CPA, CVA, has been promoted to senior; he joined the firm in 2022 and has been involved in accounting, compliance, tax return preparation, business valuations, and special projects.
Firms: With Intelligence named Houlihan Lokey’s Portfolio Valuation and Fund Advisory Services practice the “Best Valuations Firm for Hard to Value Assets” for 2024, which is the practice’s eighth time winning this award in the U.S. and its seventh consecutive win; Private Equity Wire also named the practice “Valuation Service of the Year” … REDW Wealth LLC, an SEC-registered investment advisory firm subsidiary of Albuquerque, N.M.-based REDW Advisors & CPAs, will join with Hatcher Financial of Phoenix, a firm with 400 clients that it provides with tax, accounting, and financial services; REDW has a business valuation and transaction advisory practice … Cincinnati-based Barnes Dennig will merge with Greenwalt CPAs of Indianapolis, and the combined firm will have about 215 employees and five offices in Ohio, Indiana, and Kentucky; Barnes Dennig offers business valuation services, and Greenwalt offers some related services but does not list business valuation specifically.
Please send your professional and firm news to us at editor@bvresources.com. |
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CPE events
Power Panel: Trends and Issues in Business Valuation, October 7, 10:00 a.m.-11:40 a.m. PT/1:00 p.m.-2:40 p.m. ET. Featuring: Ken Pia (Marcum), Jeffrey S. Tarbell (Houlihan Lokey), Neil J. Beaton (Alvarez & Marsal), and Michelle F. Gallagher (Adamy Valuation). CPE credits: 2.0.
They’re back! And they will discuss some of the hottest topics in the business valuation profession.
Unraveling Financial Deception: Divorce Case Study for Experts. Part of BVR’s series on Compelling Case Studies. October 8, 10:00 a.m.-11:40 a.m. PT/1:00 p.m.-2:40 p.m. ET. Featuring: Michele Laws (Divorce Dollars). CPE credits: 2.0.
A high-net-worth divorce case in which financial deception was prevalent, including unreported income, lifestyle discrepancies, and an undervalued family business, is examined in depth. |
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We welcome your feedback and comments. Contact Andy Dzamba (Executive Editor) at: info@bvresources.com.
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