One-on-ones are the best way to win new BV business

A direct encounter with a prospective client or referral source continues to be the most effective method to bring in valuation business, according to this month’s Two-Minute Practice Survey. The one-on-one meeting was cited by 33% of survey respondents as the best method, and it has been the top choice for the past 10 years in various BVR surveys. Other effective methods include using the firm’s website to attract clients (cited by 17%) and cross-marketing to existing clients (17%). Public speaking and joining trade associations were also cited as effective methods.

Referral sources: The top three referral sources are attorneys, previous or existing clients, and CPA firms (not Big Four). Other sources mentioned include business owners, firm colleagues in other practice areas, other valuation firms, investment bankers/M&A advisors, and the Big Four firms.

Are BV firms using artificial intelligence to help with marketing? Yes, say 28% of respondents. Typically, AI is used to generate content for marketing purposes across various media, including blogs, social media, video production, and website content.

Our thanks to all of you who participated, and we’ll have another survey next month

Court-appointed attorney can’t testify on stock gift valuation

In a Hawaii estate matter, one of the founders of the Foodland grocery chain made lifetime gifts of company stock to some of her children. Her attorney had valuations prepared that were filed with the gift tax returns. After she died, her other children were to get cash based on the value of the gifted stock so that all the children were treated equally.

Shortchanged? One child who was to get cash claimed the stock was undervalued, so she believed that she did not get all the cash she deserved. She sued the attorney for malpractice and breach of fiduciary duty, but he maintained that the valuations were reliable. The state probate court appointed another attorney as a special representative to review the stock valuations, and he concluded that they were not up to standards and, therefore, unreliable. The plaintiff wanted to call that attorney to testify, but the defendant challenged his qualifications.

The district court found that the court-appointed attorney was not qualified to testify as an expert witness under Federal Rule of Evidence 702. He himself acknowledged that he was not an expert in business valuation but that he consulted with a valuation expert to prepare the report for the probate court.

The case is Sullivan v. Loden, 2024 U.S. Dist. LEXIS 180494, and a case digest and full opinion are available on the BVLaw platform.

BVR lends a helping hand in wake of disasters

For business valuation experts grappling with business interruption (BI) and damages matters in the wake of this year’s natural disasters and tech outages, BVR is offering some free resources. You can download two full chapters from The Comprehensive Guide to Economic Damages, 7th edition, that deal with BI, lost profits, and damages claims:

1. Chapter 9, “Context of the Lost Profits Damages Claim,” by Jonathan M. Dunitz, Esq. (Verrill), and Tyler L. Farmer, Esq. (Harrigan Leyh Farmer & Thomsen LLP). To download this chapter, click here.
   
   
2. Chapter 45, “Business Interruption and Damage Claims,” by John Garaffa, Esq. (Butler Weihmuller Katz Craig LLP). To download this chapter, click here.

Also, we’ve uploaded a video clip from BVR’s symposium “Calculating Damages for Insured Claims” in which Dunitz discusses the limitations in claiming damages based on the indirect effects of natural disasters, such as the speculative losses due to increased demand following a hurricane or flood. To view the clip, click here.

We hope you will find these resources helpful.

Earnouts in M&A deals are up significantly

The inclusion of earnouts in private-company deals increased significantly in 2023, with nearly one-third of nonlife sciences deals containing an earnout provision, a 50% increase from the prior year, according to the SRS Acquiom “2024 M&A Deal Terms Study.” Historically, earnouts have been most prevalent in the life sciences sector, but now they are becoming increasingly common across all industries, the study found. Also, the amount of contingent consideration tied to earnouts “ticked up slightly,” from 30% of the closing payment in 2022 to 32% in 2023. The full study, which also examines valuation trends, deal structures, purchase price adjustments, and more, is available if you click here.

SEC will put more scrutiny on hard-to-value assets

The Securities and Exchange Commission (SEC) has announced its 2025 examination priorities for registered investment advisers and investment companies, broker-dealers, and other registered entities that are subject to inspection by the commission’s Division of Examinations (EXAMS). Among the new areas that will see more scrutiny are illiquid or hard-to-value assets, especially when valuation is used as a basis to calculate management and performance fees. Also, artificial intelligence is on the agency’s radar, and it will examine the use of AI throughout the adviser’s operations investment management, trading, compliance, and/or marketing processes. A full copy of the SEC’s Fiscal Year 2025 Examination Priorities is available if you click here.

October 2024 issue of Willamette’s Perspectives is released

The October 2024 issue of the quarterly digital publication Perspectives, from Willamette Management Associates, has been released, and you can access it if you click here. Willamette staff members wrote all the articles, and this latest issue includes:

• “Key Considerations in the Valuation of Carried Interest From a Tax Perspective” (Gregory D. Smith);

• “Digging in the Dirt: Performing Forensic Analysis of Financial Records for Valuation Purposes” (Daniel R. Young); and

• “Jointly Retained Valuation Engagements: A Road Map for Trust and Cooperation” (Jesse J. Gillett).

Gillett served as editor for this issue.

NACVA adds to CVA and MAFF ranks

The National Association of Certified Valuators and Analysts (NACVA) announced that 45 members earned their credentials (or are candidates) during the third quarter of 2024. Of these members, 43 earned the Certified Valuation Analyst (CVA) credential (or are candidates) and two members earned the Master Analyst in Financial Forensics (MAFF) credential.

Upcoming global valuation conferences for the rest of 2024

Here are some of the major valuation events and conferences taking place around the world—click on each of the conference titles for more information and how to register:

• November 15: BVIUK Annual Conference, London;

• November 20-22: IVSC AGM 2024, Dorsett Kai Tak, Hong Kong;

• November 28: APIEx Symposium 2024, Singapore;

• December 5: CHFT Advisory 10th Anniversary Party, Hong Kong;

• December 5-6: EACVA Annual Business Valuation Conference, Dusseldorf, Germany; and

• December 5-7: 55th Indian Valuers Congress, Kochi, India.

BV movers . . .

People: Brian Foltyn, CVA, has been appointed to the Arizona State Board of Accountancy to serve a five-year term on the board; he is a principal and practice group leader in the Valuation & Related Financial Services Group at REDW (Phoenix) and has almost 30 years of professional experience in both industry and public accounting, which includes business valuation advisory services, strategic planning, dispute advisory, forensic accounting, and mergers and acquisitions.

Firms: Cohen & Co., an assurance, tax, and business advisory firm with about 800 professionals in 12 offices across seven states has taken a strategic growth investment by Lovell Minnick Partners, a private equity firm focused on investments in financial services, business services, and financial technology companies; Cohen & Co. has a valuation and litigation support services practices led by Josh Lefcowitz, CPA/ABV/CFF, CFE, ASA … Newport News, Va.-based PBMares has merged with Fairfax, Va., accounting and tax firm BSB CPAs + Advisors, a deal that adds five partners for a combined roster of 60 partners; PBMares has a business valuation practice led by Dwight Buracker, CPA, CVA.

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

CPE events

Introduction to Power Automate: Automate Your Workflows and Increase Productivity (A BVR and CBV Collaboration), November 5, 10:00 a.m.-11:40 a.m. PT/1:00 p.m.-2:40 p.m. ET. Featuring: Tomas Milo (Sigma Optimized). CPE credits: 2.0.

BVR and CBV Institute present this webinar, which will review key features and examples using Microsoft’s Power Automate, a comprehensive, end-to-end cloud automation platform powered by low code and AI. Examples will show how the technology can be used to automate repetitive work, reduce errors, and increase efficiency.

Examining Case Studies in the Healthcare Context, November 7, 10:00 a.m.-11:40 a.m. PT/1:00 p.m.-2:40 p.m. ET. Featuring: Kathryn A. Taylor (ECG Management Consultants). CPE credits: 2.0.

Call coverage and medical directorship arrangements have been a focus of many enforcement actions that have changed organizational practices and set lasting healthcare precedents. Regulations govern all facets of the healthcare industry, and implications for violating those regulations may cause financial and reputational ruin.