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The National Association of Certified Valuators and Analysts® (NACVA®) has been educating and credentialing CPAs and other financial advisors to support business owners in understanding the value of their business for the past quarter century. NACVA’s  global Certified Valuation Analyst® (CVA®) designation is the most widely recognized valuation credential and the only business valuation credential accredited by the National Commission for Certifying Agencies® (NCCA®).

The Size Effect Continues to be Relevant

Considerations in Applying a Size Premium (Part III of III) In this third and final article, as displayed in Exhibits 1 through 4 in Part 1 of this three-part article, the size effect has been observed even when looking at recent periods starting in 1981 and 1990. If one holds that you should not apply the SP in the MCAPM and that beta should be the only measure of risk, one is supporting using the pure or ...

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The Business Will

It is Not Just About Having a Buy-Sell Agreement A business is a dynamic entity. Businesses are fueled by the passion and vision of its owners. While it is hard to be passionate about administrative aspects of building a successful business, the truth is, some of that stuff is crucial. Take the buy-sell agreement or similar provisions in an operating agreement—think of it as the business will—the "what happ ...

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The Size Effect Continues to be Relevant

Criticism of Ang (Part II of III) In the second part of this three-part article, Roger Grabowski respond to criticism over the years about the validity of CRSP Decile Size premia data. He begins by addressing the criticisms from a paper published in NACVA’s QuickRead by Clifford Ang. Roger Grabowski argues that Ang’s critique is flawed and presents concrete evidence to that effect. He also addresses other c ...

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The Size Effect Continues to be Relevant

When Estimating the Cost of Capital (Part I of III) In this paper, published in three parts with NACVA’s QuickRead, Roger Grabowski reviews the size effect, potential reasons why one observes the size effect, and correct common misconceptions and address criticisms of the Size Premia (SP). Throughout this paper, the author shows that using a pure market factor as the sole risk factor in estimating the expec ...

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Big MAC II

Fresenius is the First (General) MAC in Delaware History (Part II of II) This is a follow-up article about the first seller that successfully terminated a deal in Delaware due to a MAC clause. The previous article addressed the General MAC clause. This article addresses the Regulatory MAC clause. Introduction This is a follow-up article about the first seller that successfully terminated a deal in Delaware ...

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Using a Non-Beta-Adjusted Size Premium in the Context of the CAPM Will Likely Overstate Risk and Understate Value

Measuring the Relative Performance of Small Stock vs. Large Stock and the Cost of Equity Roger Ibbotson and James Harrington discuss two different ways of measuring the relative performance of small stocks versus large stocks in this article: (i) the “small stock premium” and (ii) the “beta-adjusted size premium”. Ibbotson and Harrington demonstrate why using a non-beta-adjusted size premium within the cont ...

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Residency and Domicile Determinations

for State Income Tax Purposes How will the SALT limits impact growth? Demographic trends? In this article, the author looks at current data, considers these issues and other tax matters that complicate residency choices and options. A few years ago Fox News Channel’s commentator and nationally syndicated radio talk show host (both based in New York), Sean Hannity, threatened that he was going to leave New Y ...

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Valuation of Ambulatory Surgery Centers

In an Era of Reform (Part I of II) As demand for healthcare services continues to grow, the site at which these services are performed is experiencing a simultaneous transformation from the inpatient (e.g., hospital) setting to the outpatient setting. This transformation is being driven by factors such as: (1) technological advancements; (2) an increasingly consumer-driven and convenience-driven healthcare ...

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A Valuation Practitioner’s Musings

on Corporate Income Taxes What corporate tax rate should valuation practitioners use going forward given the current environment? Despite corporate rates being “permanent”, is that so?! How should practitioners handle temporary differences? How do we decode a financial statement? In this article, the author shares his thoughts on how valuation professionals should approach a valuation engagement in this unc ...

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Case Law Update

December 2018—U.S. Tax Court on Qualified Appraisals and Gill v. Gill, Minnesota’s Supreme Court Rules on the Status of Earn-Outs in Dissolution Cases The U.S. Tax Court issued two valuation memorandums in September and October 2018. Each memorandum serves as a reminder of the importance of attaching a qualified appraisal. The issue in Presley v. Commissioner, T.C. Memo. 2018-171 (October 15, 2018) was whet ...

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The Growth, Development, and Difficulties

of the Current Marijuana Business (Part II of II) In November of 2018 there are some 28 thousand marijuana/cannabis businesses in operation and employing about 150,000 people in the United States and they manage and control some nine billion dollars in essentially cash revenues. This industry continues to grow. In this second part, the author illustrates the importance of choice of entity, provides an overv ...

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The Growth, Development, and Difficulties

of the Current Marijuana Business (Part I of II) In November of 2018, there are some 28,000 marijuana/cannabis businesses in operation, employing about 150,000 people in the U.S., and they manage and control some $9 billion in essentially cash revenues. This industry continues to grow. In this two-part article, the author provides a brief overview of the history of this industry and tax issues CPAs and cons ...

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Valuations that Literally Speak with Your Clients

Alexa Voice AI Makes Conversational Valuation Possible What if your valuation reports could have a two-way conversation with your clients? How would that improve the usability of your work product? Could it increase the value of your firm’s intellectual capital? In this, the author discusses how Alexa Voice AI can deliver a calculation report to a client. ...

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News You Can’t Use

SSFS 1 Announced at AICPA FVS Conference The AICPA just announced the upcoming Statement on Standards for Forensic Services (SSFS 1) engagements. In this article, C. Zachary Meyers offers readers a sneak peek into the three key areas of interest. ...

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Exercising Due Professional Care

Obtaining Adequate Information in Small Business Valuations As valuation professionals, one of the challenges we face in valuing small businesses is the quality of the financial information provided by the subject company. The NACVA professional standards require members to exercise due professional care and obtain sufficient relevant data to prepare a conclusion, recommendation, or position. In this articl ...

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Back to Basics

Be a Trusted Advisor Valuation analysts are in a unique position to help their clients. Most business owners have never looked at their business the way a valuation professional does. If the valuation analyst does a yearly check-up or checks in with their clients but does not include a discussion or a strategy to build value in their business, perhaps it should. This is an opportunity to expand the work bas ...

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The Due Diligence Imperative

Conclusion (Part Six of a Six-Part Series) The first installment of this six-part series set forth an overview of the due diligence imperative for valuation professionals, in the context of the Four Pillars of Healthcare Value, i.e., Reimbursement, Regulatory, Technology, and Competition. The second through fifth installments reviewed the due diligence process related to the reimbursement, regulatory, compe ...

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Overview of Fair Value Considerations in Business Combinations

Bargain Purchase Transactions This article summarizes the fair value measurement guidance and financial accounting considerations in business combinations—and specifically, in bargain purchase transactions. This discussion also describes the principles of acquisition accounting as they relate to fair value measurement. And, this discussion describes many of the valuation analyst considerations regarding the ...

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Buyers and Sellers Can Benefit from Use of Earnouts

Must Know Accounting Rules Earnouts are often used in transactions to bridge the gap between what a buyer is willing to pay up front and what a seller wants in the way of total compensation to complete a deal. Therefore, earnouts are typically constructed to allow the seller to enjoy additional upside if the acquired company reaches certain performance targets after the sale while providing the buyer with d ...

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