Top State Courts Consider the Value of Goodwill, the Legitimacy of the Income Method of Valuation In State of Texas v. Clear Channel Outdoor, the Texas Court of Appeals considers testimony from an expert regarding the income method of valuation for the billboards; in Walsh v. Walsh, the Court of Appeals of Arizona reassesses the realizable benefits of stock redemption value in a law firm, and determines the net assets of the firm should not be conflated with the husband’s own goodwill based on his reputation and experience.
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There’s a Maze of Standards Out There. Here’s a Guide to Key Provisions in The Most Important Ones *AUTHORS NOTE* This article was written in May 2010. In December 2010, the Federal Rules of Civil Procedure, section 26(a)2(b) were updated such that drafts and attorney communications are now specifically recognized as work product and not discoverable. The exception to this is correspondence as it relates to compensation for the expert’s study or testimony or if the correspondence identifies facts or data that the expert considered in forming his or her opinion. For the actual updated rule click here.
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Added Ammunition Support Appraisal Assumptions Sherry Smith offers a look at data sources that can deepen and add credibility to valuations, M&A offers, and more. Pepperdine Private Capital Markets Survey, Sageworks, and a number of Secondary Markets for Private Companies (SecondMarket, Sharespost, and Triago) all offer illuminating information.
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Compensation and Growth Opportunities are Key to Employee Retention; Other Factors—and How to Differentiate Jennifer Wilson at CPA Insider writes that firm leaders should be prepared to provide clear answers to the most pressing questions young high performers have about what to expect on the path to partner.
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Is Brand Value Best Calculated by Deducting and Capitalizing Franchise and Management Fees? Or by Weighing Brand Value as a Factor of Revenue? A debate is swirling in the appraisal community regarding the value of intangibles, most notably brand affiliation, reports Patrick Maycock at HotelNewsNow.com. While one party holds to a more traditional viewpoint that calculates such intangibles by deducting and capitalizing a property’s franchise and management fees, the other is looking toward a newer approach that weighs brand value as a factor of revenue:
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Small Business Owners Hiring Intentions for the Next 12 Months Dropped to -4 in November, Down from +10 in July Jeffrey Sparshott at the Wall Street Journal Real-Time Economy Blog reports the news:
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Federal Government, Which Makes an ROI of $7.20 for Every Dollar it Invest in Detection and Enforcement of Fraud, Is Increasingly Monitoring Compliance Plans Lucien W. Roberts at Physicians Practice notes that physician practices are increasingly being monitored by federal agencies sensitive to compliance plan violations:
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One in 26 American Families Reports Raising a Child with a Disability The Wills, Trusts, & Estates prof blog notes new detail available on this sort of trust:
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Bay State Charges Two Firms with Fraudulent Security Sales Investment News, the daily online publication of the financial advisory industry, reports that Massachusetts took aim Thursday at two players in the small but potentially vast arena of crowdfunding, which lets small private companies sell equity directly to investors:
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A Premium Multiple is Hard to Come By and Harder to Keep; Owners Should Worry More About Improving Performance Susan Nolen Foushee, Tim Koller, and Anand Mehta make the case in McKinsey Quarterly that executives considering company value often worry too much about their company’s multiple (e.g., a P/E ratio, or EV/EBIDTA, etc.) instead of focusing on company growth. It isn’t that multiples aren’t legitimate data to consider. But multiples can vary widely if a company is comparing itself to the wrong set of competitors. Multiples legitimately vary considerably based on the leverage a company is currently using and…
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Federal Cases Examine Bankruptcy, Valuation Standards The Court of Appeals for the Eleventh Circuit weighs in on penalties for “gross valuation misstatement” in Gursthaw v. Commissioner, and the U.S. Bankruptcy Court for the Eastern District of Tennesee rules on the value of mortgage liens In re: Williams.
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More Than Just Valuation: How to Seize Opportunities by Getting Out of Your Comfort Zone It’s a trap to define yourself as a valuator, rather than someone in the “problem-solving” business. Rand Curtiss explains why.
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What Happens When a Business is In Over Its Head and Who is to Blame? When firms approach bankruptcy, a definition of what constitutes “deepening insolvency” becomes critical in establishing the legitimacy of litigation concerning damages, breach of fiduciary duty, and more. Michael J. Molder explains context, consequences, and case law on the matter.
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Redefining the Value of Appraisals, and Helping Clients Understand Paul R. Hyde discusses how appraisals come in a variety of configurations based on client needs. Here are tips on how to balance these conflicting demands, and how best to set the expectation for work in valuation.
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Implications of the SEC IFRS Work Plan for Private and Public Issuers; How Slow Adoption May Rewrite GAAP Grant Thornton Audit Services has published a 16-page report providing background and context on IFRS in the United States. The report explores how market forces press the issue, cover SEC final report highlights and reaction to the report, summarizes how some companies are preparing for IFRS today, and offers a set of action steps required to put together a logical, cost-efficient readiness plan:
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Although 2013 Rates Are Still Unclear, Smart Planners Are Making These Moves Today Laura Sanders at the Wall Street Journal reports that the annual scramble to make smart tax moves before December 31 is proving especially vexing this year, since Congress still hasn’t settled 2013 tax rates on income, investments, large gifts, and estates. Deductions and other breaks are in doubt. And some questions—such as the applicability of the alternative minimum tax—are still unsettled for 2012. Nonetheless, tax planning is possible. Some suggestions:
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Engage Employees with Teamwork and Consensus; Look Beyond Your Own Industry, and Execute Carefully In a recent issue of the Financial Planning Association’s Practice Management Solutions, Paul R. Brown identifies important factors successful business owners pay careful attention to when managing substantial change in their organizations successfully. Here’s what to pay attention to.
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The Definition of Risk is Standard Deviation of Returns; Here’s What it Means, and What it Has to Do with “Total Beta” Is the Capital Asset Pricing Model (CAPM) superior as a valuation modeling tool to Total Beta? Peter J. Butler and Gary Schurman think not. Here’s why:
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Calculating Discounts Accurately Depends a Lot on Company Specifics. Here’s What You Need to Know Dennis Bingham and KC Conrad provide a thorough look at options for calculating a discount for lack of marketability (DLOM), including restricted stock studies, pre-IPO studies, theoretical and option pricing models, discounted cash flow (DCF), Mandelbaum factors, and more.
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Lots of Room for Innovation on Security. M&A Pros: Here’s What to Watch! What’s an important sector to keep an eye on in terms of M&A? Mobile Security. Mobile devices face at least four threats: Fraud (stealing $$), data theft, and probing and nuisance attacks. There’s room for innovation on everything from voice encryption, payment card processing, digital rights management, user authentication, application testing, and network monitoring to forensic triage, malware prevention, and more. Brent Lorenz, McLean VP, explains.