Valuation-Shopping Investigated On December 19, 2023, the U.S. Department of Justice (DOJ) announced that it had entered into a $345 million settlement with Community Health Network Inc. (CHN), a healthcare network headquartered in Indianapolis, to resolve claims that the hospital violated the False Claims Act (FCA) by knowingly submitting Medicare claims for services which were referred in violation of the Stark Law. This settlement is notable in part because it is the largest Stark-related FCA settlement ever reached by the DOJ. This article discusses this controversy. On December 19, 2023, the U.S. Department of Justice (DOJ) announced that it had…
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A Key Formula Used in Business Valuation Net working capital is a crucial component of business valuation since it impacts both a company’s enterprise value via its projected cash flows and its equity value via excess or deficient net working capital levels as of the valuation date. In addition, net working capital for valuation purposes is more nuanced than simply taking current assets minus current liabilities, as is often done when calculating net working capital in an accounting context. This article discusses what is net working capital and why it is important to value a business. When valuing a business,…
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Patchwork Approach Continues in Congress On March 9, 2024, President Biden signed into law a $460 billion spending package to continue funding the federal government for the remainder of the 2024 fiscal year. Contained within the spending package was legislation to cut in half the 2024 Medicare physician payment update of approximately -3.4%. This article discusses the payment update, other healthcare provisions contained in the bipartisan spending bills, and responses from stakeholders. On March 9, 2024, President Biden signed into law a $460 billion spending package to continue funding the federal government for the remainder of the 2024 fiscal year.[1]…
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Watts v. Smith–Long-Term Means Long-Term In the business valuation world, valuators attempt to consider a benefit stream into perpetuity, which is a very long time. Sadly, many business owners have difficulty grasping long time periods as they execute agreements dealing with multi-generational ownership and family relationships. In Watts v. Smith, 2023 Ky. App. (Unpub.) (Ky. Ct. App. September 8, 2023), the children and grandchildren of a family business’ founders learned just how long stock agreements can last and the lengths to which courts will go to enforce them. In the business valuation world, valuators attempt to consider a benefit stream…
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Guidance Provided by Godinger Silver Art Ltd. The Panduit test is a widely used four factor test that is applied primarily in patent cases but also intellectual property cases. The test factors can be found in Panduit Corp v Stahlin Bros. Fibre Works, Inc. This article will focus primarily on the 2024 Godinger Silver Art Ltd. decision. The language of that decision has been used to explain the court’s understanding of how experts should apply the Panduit factors. Experts are asked to apply their education, training, and experience to assignments in estimating lost profits or critiquing the opposing expert’s analysis.…
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Marketing is difficult. Yet, there are ways one can make more effective inroads. In this article, the author makes four suggestions to make your marketing efforts more effective. If the ultimate goal of your marketing effort is to increase the number of leads/prospects in your pipeline, the article includes some metrics one can measure to assess success. Do you know what is working and what is not with your marketing and practice development efforts? For many business valuation practitioners, the honest answer is that they cannot answer that question; not really. They have a “feeling.” What can you do about…
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A Call to Opportunity (and Survival) As the use of artificial intelligence (AI) tools continues to become mainstream, it is no wonder that so many professional services are becoming even more commoditized than they were pre-AI. Many professional service providers, including valuation practitioners, are feeling the combined impact of price compression from clients and higher expectations of service quality and responsiveness. For those of us who plan to continue practicing as professionals for longer than the next few years, the long view is rather disconcerting. Within the next decade, AI is expected to become one-million times more powerful than it…
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The Principles of Conservatism in Action Most business owners understand the industry in which they operate and tend to be good at running the day-to-day operations. Yet, that does not mean they have made optimal decisions or that they have the necessary controls and financials in place that enable them to make sound financial decisions. Companies that do not keep high quality data will likely have a lower value. This article focuses on the data problems with the valuation of a sawmill that I recently completed; minor facts and circumstances have been altered to preserve client anonymity. Most business owners…
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Consider the SLAT and GRAT in Gift Planning Understanding gift tax regulations is crucial for individuals and their advisors because it impacts estate planning strategies and can significantly affect the overall tax liability. Properly utilizing exemptions and understanding the rules surrounding gift taxation can help individuals minimize their tax burden and ensure a smooth transfer of assets to their intended beneficiaries. This article discusses the availability of the SLAT and GRAT gifting techniques. Understanding gift tax regulations is crucial for individuals and their advisors because it impacts estate planning strategies and can significantly affect the overall tax liability. Properly utilizing…
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A Practice Guide for Practitioners What are the proper questions and approaches that enable valuation professionals to value non-fungible tokens (NFTs)? The author describes the questions and methods used to value NFTs. With the recent IRS proposal, the focus on fair market value is repeated as the preferred method for cryptocurrency transactions that do not involve cash.[1] The IRS redefines fair market value to simply market value for cryptocurrencies traded on an exchange; this limits the applicability to less than 10% of cryptocurrencies and highlights the need for practitioners to understand how to apply fair market value calculations to cryptocurrency.…