Skillsets Needed to Excel as an Expert During Cross-Examination For those financial experts awaiting their first opportunity to testify, as well as for those not certain of their skillsets, the author shares his tips on how to be impressive on the witness stand. As an attorney-CPA credentialed in business valuation, I have had the opportunity both to be the “expert” sitting in the witness chair and to be the lawyer doing the cross-examination. I have also had the advantage of being buyer or seller counsel on many “real world” transactions. It is certainly more enjoyable to be the person asking…
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Reflections on the Ninth Circuit’s Decision in Amazon.com, Inc. v. Commissioner What is included when valuing intangibles assets for transfer pricing purposes? This is an issue that was addressed once by the U.S. Tax Court and more recently, the Ninth Circuit Court of Appeals. In a unanimous decision by the U.S. Court of Appeals for the Ninth Circuit (issued on August 16, 2019) the court of appeals affirmed the decision of the U.S. Tax Court in Amazon.com, Inc. v. Commissioner, 148 T.C. 108 (March 23, 2017). The court held that intangible assets under the U.S. transfer pricing regulations, under Section…
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Miscalculations and Entitlement Traps? What exactly is a “Legacy Payment”? Legacy Payments are those payments made to the prior generation when the next generation buys a family business. These payments include the debt service, principal and interest, on the purchase of the family business and possibly the real estate too; in addition, there are other types of Legacy Payments that can add weight to the total payments expected by the exiting family members. In this article, the author discusses what could go wrong and how legacy payments and an entitlement mindset can lead to the demise of the business. Ok,…
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Are You Discounting or Negotiating? Are you discounting your project price? Negotiating the project’s price? Are these acceptable in the current economic environment? Here, Rod Burkert answers these questions. The times are certainly a bit crazy. And we are all doing what we can to pivot and survive. But discounting your pricing doesn’t have to be one of the tactics you pursue. You can already guess that discounting and negotiating are not the same things—though I am telling you that one-way negotiating (and we do a lot of that) is discounting. Discounting is definitely a problem … negotiating, less so…
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Thinking Through the Valuation Implications of COVID-19 As business valuation professionals, we are required to project the economic future of a business. In the past, valuation professionals used many sources of information to reduce the uncertainties inherent in valuation, key among them: 1) past performance, 2) industry reports, 3) company and/or stock sale data, and 4) cost of capital data. Now, valuation professionals are suddenly faced with these resources having lost much of their predictive value and reports are due. Throwing up one’s hands is not an option. Since very few valuation professionals have the prognostic abilities of Nostradamus, the…
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Technology (Part V of V) As noted in the first installment of this five-part series, an ambulatory surgery center (ASC) is a distinct entity that primarily provides outpatient surgical procedures to patients who do not require an overnight stay after the procedure. ASCs typically provide relatively uncomplicated surgical procedures in a non-hospital, outpatient setting, and most ASC cases are non-emergency, noninfected, and elective. The last installment of this series on the valuation of ASCs will review some of the technology advancements that are driving ASC industry growth and evolution. [su_pullquote align=”right”]Resources: Valuation of Ambulatory Surgery Centers—Introduction (Part I of V)…
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Four Key Differentiators that Lead to Success Hinge Research Institute conducted a study that involved 230 accounting and financial services firms. This 2020 High Growth Study includes extensive information on what sets apart high growth firms from its competitors in the study. It focused on those that had experienced 20% or greater compound annual growth in revenue over a three-year period. This article provides an overview of critical findings. It is no secret that certain accounting and financial services firms grow faster than others. At the Hinge Research Institute, we have been interested in understanding why and how—specifically, what types…
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Regulatory (Part IV of V) As noted in the first installment of this five-part series, an ambulatory surgery center (ASC) is a distinct entity that primarily provides outpatient surgical procedures to patients who do not require an overnight stay after the procedure. ASCs typically provide relatively uncomplicated surgical procedures in a non-hospital, outpatient setting, and most ASC cases are non-emergency, noninfected, and elective. This fourth installment will discuss the regulatory environment in which ASCs operate. [su_pullquote align=”right”]Resources: Valuation of Ambulatory Surgery Centers—Introduction (Part I of V) Valuation of Ambulatory Surgery Centers—Competition (Part II of V) Valuation of Ambulatory Surgery Centers—Reimbursement…
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Recognize and Avoid Substantial Valuation Differentials One of the critical inputs in the capital asset pricing model (CAPM) is beta. In practice, there are two typical ways beta is estimated. Making an incorrect assumption could lead to substantial valuation differentials of over 10% in many cases and can lead to valuation differentials of over 50% in some instances. In addition, our analysis indicates that we would not be able to tell the direction and magnitude of the valuation differential in advance unless the correct calculation is performed. One of the critical inputs in the capital asset pricing model (CAPM) is…
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Reimbursement (Part III of V) As noted in the first installment of this five-part series, an ambulatory surgery center (ASC) is a distinct entity that primarily provides outpatient surgical procedures to patients who do not require an overnight stay after the procedure. The facilities typically provide relatively uncomplicated surgical procedures in a non-hospital, outpatient setting, and most ASC cases are non-emergency, noninfected, and elective. This third installment on the valuation of ASCs will discuss the reimbursement environment of ASCs. [su_pullquote align=”right”]Resources: Valuation of Ambulatory Surgery Centers—Introduction (Part I of V) Valuation of Ambulatory Surgery Centers—Competition (Part II of V) [/su_pullquote]…
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On April 8, 2020, the American Society of Appraisers (ASA), CBV Institute, Global Association of Certified Valuators and Analysts (GACVA), National Association of Certified Valuators and Analysts (NACVA), and The Royal Institution of Chartered Surveyors (RICS) collaborated to host a free virtual town hall to discuss how the COVID-19 pandemic will impact business valuation analysts and appraisal titled “Impact of COVID-19 to Global Business Valuation and Appraisal.” This article attempts to unpack the post-COVID-19 guidance discussed during this town hall and provide a synthesized breakdown of the most critical advice provided. [su_pullquote align=”right”]Resources:NACVA COVID-19 Public Service Campaign | Staying in…
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Competition (Part II of V) This second installment in this five-part series on the valuation of ASCs will discuss the competitive environment of ASCs, by competitor type. [su_pullquote align=”right”]Resources:Valuation of Ambulatory Surgery Centers—Introduction (Part I of V)[/su_pullquote] As noted in the first installment of this five-part series, an ambulatory surgery center (ASC) is a distinct entity that primarily provides outpatient surgical procedures to patients who do not require an overnight stay after the procedure.[1] The facilities typically provide relatively uncomplicated surgical procedures in a non-hospital setting, and most ASC cases are non-emergency, non-infected, and elective.[2] ASCs compete in an increasingly…
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Introduction (Part I of V) Ambulatory surgery centers (ASC) grew dramatically until 2008 and during the growth period provided services previously only available at hospitals. In this five-part series, the authors first discuss the emergence and decline of ASCs, the forces driving growth and contraction, and how the ASC business model differs from that of hospitals. The remaining articles in this series discuss: 1) the regulatory environment of the ASC industry; 2) the reimbursement environment of the ASC industry; 3) the competitive environment of the ASC industry; and 4) the technological environment of the ASC industry. These provide a brief…
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Buyer and Seller Beware When a privately-held acquirer uses its stock to partly purchase a company, it is imperative that both the acquirer and the target in a transaction have support for, and a level of comfort with, the value assigned to the acquirer’s shares if they are being issued as part of the deal. It is especially important for the seller to conduct its own due diligence to better assess its risk exposure and understand the fair value of intangible assets. This article discusses procedures that sellers and buyers should consider before finalizing the terms. We are all familiar…
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What Do We Do Moving Forward in Time? The coronavirus and the events unleashed by the outbreak were unforeseeable to professionals preparing reports as of the end of 2019. What do we, as valuation and litigation support professionals, do moving forward in time when we are engaged to value a business? Here, the author, Ron Rudich, answers these questions. Gary R. Trugman wrote in his tome, Understanding Business Valuation, A Practical Guide to Valuing Small to Medium-Sized Businesses, Second Edition, beginning on page 510, the following: Valuation as of a Specific Date A business valuation is similar to a balance…
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Opportunities Available to Drive Revenue and Remain Relevant Q1 2020 is already in the books. If you are thinking about your practice development goals, strategies, and tactics for the rest of the year, Rod Burkert has some ideas regarding what to do and identifies the opportunities associated with five options. Hard to believe that Q1 2020 is already in the books. And you might be thinking about your practice development goals, strategies, and tactics for the rest of the year. What we can achieve (goals) and how we achieve it (strategies and tactics) will be affected by forces that influence…
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Valuing Liabilities Differs from Valuing Assets Valuing contingent/unliquidated liabilities raises some interesting questions. Do contingent/unliquidated liabilities have liability-specific risk? If yes, does liability-specific risk result in lower or higher obligations? Why do contingent/unliquidated liabilities related to lawsuits tend to settle as opposed to go through verdict and appeals? This article addresses these questions. Valuing contingent/unliquidated liabilities raises some interesting questions. Do contingent/unliquidated liabilities have liability-specific risk? If yes, does liability-specific risk result in lower or higher obligations? Why do contingent/unliquidated liabilities related to lawsuits tend to settle as opposed to go through verdict and appeals? This article addresses these questions.…
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Relevance and Alternate Approaches to Succeed Traditionally, accounting and financial services organizations have relied on their firms’ partners to “make it rain” or by using their connections, both personal and professional, along with a sprinkling of charisma, to bring in new business and revenue. How effective is this traditional model in a technology driven world where buyers of services can now access more information than ever to use in their decision-making strategies? Dr. Frederiksen discuss the relevancy of this traditional model. Traditionally, accounting and financial services organizations have relied on their firms’ partners to “make it rain” or by using…
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Get Clients to Count on Your Accounting Is it the valuation of a small privately held company with three employees? Or a large multi-national with employees in the thousands? Perhaps it is reviewing assets in a highly contested divorce. One way or another, you are trying to reach a decision, an opinion, or a conclusion from the data in front of you. Using big data, you must compose a story and present the data in a manner that is compelling and memorable. This article discusses the importance of embracing big data and showcasing one’s expertise. Is it the valuation of…
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Valuation Issues for Wind and Mineral Surface Development Rights As wind energy has emerged as a leading source of energy, several issues have arisen with respect to the rights of parties holding surface and mineral rights. There are important legal issues that need to be explored to assess whether to develop a wind energy farm. This article provides a historical and brief legal overview of the issues. By the mid-19th Century, the effects of the Industrial Revolution had created a need for a cheaper and more convenient fossil fuel than coal: petroleum. Edwin Drake had drilled the first oil well…