Statistical Confidence Can Help Pinpoint Value. Many questions have arisen concerning the reliability of valuations using the Direct Market Data Method (DMDM). Rand Curtiss shows how to use statistical techniques to answer them with confidence. ...

The Impact of Fraud and Abuse Can Far Exceed the Value of Stolen Money—Civil Penalties Are Often Exorbitant Clients often look to their attorneys as trusted advisors on the issue of prevention of corporate fraud, waste, and abuse. In this article, Joe Epps identifies the impact occupational fraud and abuse has on a company; present governmental oversight issues associated with fraud and abuse; and several c ...

Businesses Incur Expenses In Order to Generate Sales. Understanding How These Different Variables Relate to Each Other is Important. Here are Some Tips. Often experts present opinions based on statistical analysis. It helps to understand some basic statistical tools.  Dave Sutherland discusses some tools used to test for relationships that may exist among data sets, such as sales, marketing, cost of goods s ...

Plus: Rulings on Family Business Share Value in Oklahoma, Expert Witnessing in New Hampshire The California Appeals Court rules on whether a vineyard’s expectations for future profits for land taken in eminent domain proceedings was a reasonable extrapolation in The People v. Dry Canyon Enterprises, LLC.  Click for more state case law on non-competition agreements, expert witnessing, and family business sha ...

Difficulties Sometimes Complicate a Valuation Engagement. Here’s How to Anticipate and Derail Potential Disasters With Solid, Upfront Client Conversations Conversations with clients, both current and prospective, are critically important to ensure both owner and appraiser are in agreement about what standards will be used to produce the final report, how long the process will take, and what it will ultimate ...

A Petitioner Relies Reasonably on His CPA in Gaggero v. Commissioner, the Tax Court Finds. That Makes a Difference: Here’s Why. In Gaggero v. Commissioner, Judge Holmes at the U.S. Tax Court disagrees with the IRS’s contention that the plaintiff conducted an improper scheme to avoid capital gains.  In First Street Holdings NV, LLC v. MS Mission Holdings, LLC, Judge Markell at the U.S. Bankruptcy Court finds ...

Net Cash Flow is Often the Most Significant Single Factor in a Financial Condition Analysis A financial expert in an arson case answers four questions: What changes occurred in financial condition prior to the date of the fire? What was the financial condition at the date of the fire? What was the future financial picture if there had not been a fire? Was there a potential financial benefit from the fire?  ...

A Solid Checklist to Help Businesses Deal with the Immediate Hours after Discovery of Fraud The discovery of fraud within a company can be extremely unnerving and can introduce a certain amount of panic in business owners and accounting professionals. Here’s a checklist of things you should be sure to do—from contacting law enforcement and insurers to preserving evidence and communicating with employees. ...

There Are All Kinds of Different Standards to Consider In Sophisticated Valuations. Here are Some Tips. Control premiums are difficult to calculate.  Why?  Because there are so many variables. You may need to adjust earnings to reflect a control value (i.e., restating owner’s compensation and adjusting discretionary expenses). But wait: There’s more!  There are minority earnings. And a variety of people to ...

Royalty Rates in the Life Sciences are Under Increased Scrutiny. But Has That Caused Rates to Decline? Several medical manufacturers were accused of violating federal kickback statutes. Federal enforcement prompted many companies in the industry to review and revise the terms under which they collaborate with and pay healthcare professionals for contributions of time, know-how, and intellectual property. Ed ...

Appraisers Should Focus on Objectivity and Competence and Be Ready and Flexible to Deal with Unanticipated Challenges—From Vague Case Law to New Evidence to Erupting Personalities. Rand Curtiss expounds on his philosophy that business appraisal is about boundaries: limits on what we can do. Every work challenge is filled with a large number of people, each of whom have different boundaries. Business sellers ...

Discovery should focus on the technologies storing data Karl Epps explains how technology has changed in the last year, and what impact those changes have had on current and future standards for digital evidence. ...

Valuation Discounts, What the Interest Owners See, and What a Direct Owner Sees What sort of discounts apply to pass-through entities? Rand Curtiss helps clarify, looking at investment characteristics, investment profiles, and the interaction of these elements. He draws four conclusions. Find out what they are here. ...

Deal Activity Will Likely See a Surge in 2013 if a Meaningful Deficit-Reduction Compromise Can Be Reached  Wallace Witkowski at Marketwatch reported in mid-December that deal activity will likely see a surge in 2013 if a meaningful deficit-reduction compromise can be reached.  Otherwise the market will remain stunted as it was in the past year.   Democrats and Republicans didn't come to a full agreement by ...

The Tax Court Speaks Loudly and Firmly on the Responsibilities of Business Appraisers Hempstead & Co. has published "Estate of Gallagher is a Valuation Tutorial."  The article emphasizes the importance of providing the court with a clear and convincing explanation of the assumptions and arguments you have employed in carrying out a business appraisal. It discusses the recent Tax Court Memorandum opinion ...

A Valuation Misstatement Results in Tax Underpayment; An Appraisal is “Not Qualified.” In Alpha I, L.P., v. United States, Judge O’Malley of the U.S. Court of Appeals for the Federal Circuit considers the legitimacy of certain partnership transfers to charitable remainder unitrusts (CRUTs).  In Rothman v. Commissioner, Judge Laro at the U.S. Tax Court rules on the importance of a “qualified appraisal.”  ...

Document Incentive, Retention, and Non-Compete Agreements; Build a Broad Management Team Business owners need to be careful about vague assurances to “take care of” key employees before an acquisition. Brett Stacey offers tips on how best to manage a transition in a responsible manner that’s likely to address hurt feelings, protect employee morale, and minimize law suits. ...

When Valuators Use a Weighted Average Cost of Capital (WACC) to Determine a Discount Rate, the Rate Needs to Be “Iterated.” Here’s Why. When an expert determines a discount rate for a controlling interest in a valuation using the Weighted Average Cost of Capital (WACC), that discount rate needs to be iterated. Since market values of debt and equity in a closely held company are not publicly traded and known ...

The Method You Choose Depends On the Data You Have Application of discounts and premiums is one area where valuators demonstrate added value. Paul R. Hyde shows how and when to choose the most appropriate analytical method. ...

There’s Lots We Know about Private Capital. There are Things We Don’t Know, too—and Need to Be Aware of. Robert T. Slee explains in this excerpt several key macro insights—and related themes—that his recent book Private Capital Markets is based on.  The macro insights are that corporate finance theory doesn’t predict behavior in private capital markets, and valuation, capitalization, and transfer are not di ...