SPARC the Analysis and Shine Have you ever asked your clients what drives the value of their businesses? If they feel comfortable that they know what drives their business’ value, have you ever asked them why it does? In this article, first of a two part series, Sarah von Helfenstein shares her thoughts on the kinds of things that we, as business analysts and appraisers, should consider when assessing business value.
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Grow and Retain Your Referral Base Today’s valuation firms rely heavily on referrals to produce new leads and revenues. According to a new study by NACVA and Hinge Marketing, most firms could be getting far more referrals if they made a few changes to their marketing. This article shares the findings.
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Guidance from Bross Trucking v. Commissioner (2014) Valuation analysts often have to separate company-owned entity goodwill from shareholder-owned personal goodwill in the valuation of closely held companies. These valuations may be performed for family law, shareholder dispute, breach of contract, or other litigation purposes; for transaction structuring and sale consideration allocation purposes; and for gift tax, estate tax, or income tax purposes.
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Your Next Engagement Currency has played a central role in most business valuation and financial forensic engagements since the origination of the two terms. What has not been so clear lately is the changing nature of currency and for that matter, the very definition of money itself. This article explores how digital currencies originated, their attributes, and how they should be considered for your next valuation or forensic engagement.
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Meet Your Advisory Team Selling a business is a one-time process for most owners. It is also a harrowing process involving professionals in many disciplines. Here is a description of the primary people assisting in the process.
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Why the Change from “Fraudulent Transfer” to “Voidable Transaction” May be a Big Deal The Uniform Fraudulent Transfer Act (UFTA) was recently amended and renamed; it is now called the Uniform Voidable Transactions Act (UVTA). “The renaming has no substantive effect whatever. Yet, it reflects an important truth about the act that merits discussion.” This article shows how changes in semantics can potentially lead to changes in how so-called fraudulent transfer lawsuits are addressed by practitioners and the courts.
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Review of BVR’s Special Report on Marijuana Dispensaries What do business valuation advisors and consultants need to know before providing consulting services to marijuana establishments? There are opportunities and challenges; keep in mind that marijuana is listed as a Schedule I Controlled Substance. At the national level, one Presidential candidate introduced the Ending Federal Marijuana Prohibition Act in the Senate. In its simplest form, the bill would remove marijuana from the list of Schedule I drugs. Schedule I drugs are deemed by the federal government to be highly addictive and offer no medical benefits. For those valuation analysts interested in…
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How to Apply Survey Data to Your Company, using K-means Clustering We are in an age when fraud statistics and the individual profiles of those committing the fraud are at an all-time high. How does a firm identify factors that will enable the firm to understand the risk? The Association of Certified Fraud Examiners (ACFE) annual fraud survey—readily available for free—provides valuable insight to prevent fraud. In this article, Elliott Chester shares how K-means clustering is developed and used for profiling employees.
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Title III is the Newest Crowdfinance Option for Private Companies On October 30, 2015, the SEC finalized the rules for securities crowdfunding under Title III of the Jumpstart Our Business Startups (JOBS) Act of 2012. Title III lets startups raise up to $1 million per year by selling securities exclusively through registered online intermediaries known as crowdfunding portals and broker-dealer offering platforms. And it permits all Americans to invest from $2,000 to $100,000 in those offerings per year, depending on their net worth and income. Title III offerings can launch in spring 2016. This article provides an overview of recent…
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What Financial Advisors and Quantum Experts Should Consider in this Growing Market Neither the seller nor the buyer intends a dispute to arise as a result of a successful or failed M&A transaction. However, due to the economic importance of M&A decisions and the high purchase prices paid, contentious situations can be observed in around ten percent of all M&A transactions as studies have shown. In this article, leading M&A advisors and attorneys, from Munich, Germany, share their views on the drivers that may explain the source of contention and specifics which need to be addressed by the financial advisors…
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Use of Synthetic Credit Ratings to Determine the Appropriate Market Yield for the Preferred Equity Interest Among the estate tax planning methods that include grants of “carried” or profit interests, grantor retained annuity trusts, outright gifts, etc., entity freeze is a less known, or perhaps, less utilized tool. Yet, in certain circumstances, a freeze entity can be a compelling wealth transfer mechanism. This article presents an overview of a freeze entity structure, its economics, and a valuation framework specific to freeze entities. The article also offers an example of how practitioners can deal with an important element of the freeze…
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As a Strategic Marketing Tool for Your Organization How valuable is LinkedIn for marketing your firm? Yourself? Sources project that LinkedIn will have over 500 million users by 2020. In this article, Lee Frederiksen discusses how LinkedIn can be used to market an organization.
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Are Older Insured’s Doomed to Pay More? Why is the Cost of Insurance suddenly rising?! Is there anything that insureds can do? For decades, carriers explicitly said that COI increases were unthinkable. In this article, the author identifies the reasons given by four carriers for COI increases and looks at what some other carriers have done to mitigate COI increases. This is particularly important for older business owners seeking liquidity.
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R Programming and Ivy League Classes—For Free There are a host of excellent statistical and optimization software packages available to valuation analysts and litigation support consultants. They are good, but also expensive. “R” is a programming language and software environment for statistical computing and graphics. The R language is widely used among statisticians and data miners for developing statistical software and data analysis. In this article, Lorenzo Carver introduces us to R and shows us how it can be integrated into one’s practice.
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For Current Market Conditions How can one adjust the cost of capital to reflect current market conditions? Does inclusion of the βSIZE and SPH/ERPH result in double counting? In this article, Marc Vianello answers these questions.
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Similarities and Differences in Securities Valuation Over the past three decades, the number of both dissenting shareholder appraisal rights claims and shareholder oppression claims have increased significantly. This increase has created a demand for forensic-related business and security valuation services. Valuation analysts are not legal counsel, of course. However, valuation analysts who practice in this area should be generally familiar with both the economic and the legal differences between dissenting shareholder appraisal rights issues and shareholder oppression issues. While taking specific legal instruction from legal counsel, valuation analysts should have a general familiarity with the professional guidance provided by the…
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Background and Objectives of the Job Aid (Part 3 of 3) In the third article of this three part series, the author discusses the remaining portions of the Job Aid, specifically, the Discussion and Analysis Section of the Job Aid which addresses: Evidence-Based Valuation Analysis, Theory-Based Valuation Analysis, and Weighting of Factors and Approaches and shares his views on the value and limits of this document. Read Part 1 and Part 2.
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When Performing a Business Valuation Earnings are not always objective and valuations apply a multiple to earnings to determine a company’s value. The elements making up a company’s valuation involve determining normalized earnings, a decision whether income taxes would be applied, and the capitalization rate to be used to get the value. There are also other factors, but this article looks at the quality of earnings.
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Background and Objectives of the Job Aid (Part 2 of 3) In the first of this three-part series, the leading cases involving tax-affecting where analyzed; those cases discussed included: Gross, Wall, Heck, Adams, Dallas, Gallagher, Korbel, and Guistina. This second part analyzes the first two parts of the Job Aid by section, the “Executive Summary” and first three subsections of the “Discussion and Analysis”, ending with “Additional Factors for Consideration”.
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Tools to Make You More Effective Enhancing effectiveness revolves around listening to employees, providing timely quality feedback, providing resources needed by the employee and giving employees a chance to shine. Several models are presented to allow an employee and the firm to enhance effectiveness including the tips from Stephen Covey’s book, management by wandering around, and the Pareto rule.