Reasons for Failed Negotiations There are many reasons for failed negotiations. Emotion is often a reason that people cannot resolve their differences. When individuals are highly emotional, they lose the ability to think clearly and to fully evaluate the risks in continuing the controversy. Pride, ego, vengeance, and many other factors combine and contribute to creating negotiation roadblocks. Many of these factors have emotional and psychological connections. The focus of this article considers how these factors impact decision-making, and will provide new skills, review old ones, and assist with integrating techniques into a plan that may help find common ground.…
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But Not the Cost of Debt? Determining the cost of equity can be quite interesting whereas determining the cost of debt is often boring. We may add items to the cost of equity—such as a size or company specific risk premium—that arguably are not included in the CAPM methodology used to determine the cost equity. But then we do not add these items to the cost of debt. Do only equity investors care about size and company specific risk premiums? Does not including these items in the cost of debt suggest they should not be included in the cost of…
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Key Actions to Undertake to Increase the Price of a Company This article provides a brief overview covering what the author—a middle market investment banker—believes is the most worthwhile and impactful actions that anyone contemplating the sale of their business can take right now to set themselves up for success in a future transaction process. The author recommends that prospective sellers and their advisors focus on five critical steps, with the aim of having key points to negotiate the sale and commanding the highest selling price. Steps to Raise the Price of a Company Anyone seriously contemplating the sale of…
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Six Months In Special Purpose Acquisition Companies (SPAC) have been a prime focus of the SEC over the last six months. On April 12, 2021, the SEC issued “Staff Statement on Accounting and Reporting Considerations for Warrants Issued by Special Purpose Acquisition Companies” to highlight potential accounting implications and provide guidance on making the determination between classifying the warrants issued by SPACs as equity versus a liability. Below, the authors navigate through the valuation process of SPAC warrants and the frequent issues seen thus far in SPAC warrant valuations. Special Purpose Acquisition Companies (SPAC) have been a prime focus of…
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Get Acquired for Millions—A Roadmap for Technology Services Providers to Maximize Company Value What should a technology service professional know to sell his or her company for millions. In this book review, Michael Pakter discusses Linda Rose’s Get Acquired for Millions—A Roadmap for Technology Services Providers to Maximize Company Value. Entrepreneurs aspiring to end up selling their businesses for millions should make business valuation their primary strategic imperative from start to finish. To quote Steven Covey, “Begin with the end in mind.” Those who begin to ask themselves “what is my business worth?” only when the time to sell arrives…
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Questions from the NACVA Conference Regarding Discounting Lost Earnings for Self-Employed Individuals In June 2021, the author of this article made a virtual presentation at the NACVA and the CTI’s Business Valuation & Financial Litigation Hybrid & Virtual Super Conference. The presentation was “Estimating Economic Loss of the Self-Employed: Lost Profits or Lost Earning Capacity”. One of the attendees asked a very good question regarding discounting future losses to present value, which is the main focus of this article. In June 2021, I presented a virtual session at the NACVA and the CTI’s Business Valuation & Financial Litigation Hybrid &…
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Last month, Rod Burkert wrote about the four worst ways to generate new clients. Well, then there has to be the four best ways—right?! Read on! Here, Rod Burkert describes what you must do more of to get new clients. Last month, I wrote about the four worst ways to generate new clients. Well, then there has to be the four best ways—right?! Read on! For most businesses, getting referrals is usually a top marketing priority. Who is going to discourage referrals, right?! And while we know referrals are important, do we understand how they actually work (or not)? That…
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This article discusses the recent settlement of National Spine and Pain Center signed with the U.S. Department of Justice and provides the basis to discuss the importance of obtaining an opinion regarding the FMV physician compensation. On August 6, 2021, the U.S. Department of Justice announced that it had reached a settlement with National Spine and Pain Center, LLC (NSPC), a Maryland physician management services organization (MSO). As part of the settlement agreement, NSPC signed a non-prosecution agreement and agreed to pay $5.1 million to resolve criminal Medicare Anti-Kickback Statute violations.[1] An affiliate of NSPC, Physical Medicine Associates, Ltd. (PMA)…
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Grantor Trust—Living Trusts to Irrevocable Trusts and their Taxation This article provides the general rules which are applicable for many and sometimes almost every situation, but with taxes and legal issues there are very few absolutes and almost everything has exceptions. That is why competent and experienced advisors must be used in every situation. This article provides an overview of the different types of trusts, their purposes, and taxation of the same. Trusts are an effective mechanism to provide for transfers of assets, protect assets from eventual or potential creditors, enable assets to be used in situations where the person…
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Post Closing Task List This article provides readers with a checklist used at a business transaction that just closed. The list was adapted from e-mails sent by the author to clients immediately after the closing. The list includes what they can and should do following the closing and is a way to further involve oneself in post-closing activities. The list collects all the different things (personal, investing planning, and business) the client would need to become involved with and think about, including the final sales’ price adjustments. This is a checklist for clients that just closed on the sale of…
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What to Watch For and What to Watch Out For Expert testimony is not for the faint of heart. The best expert is that person who gathers trial experience well before the first testimony experience and in that time has not only developed the technical skills—meaning mastered and acknowledged the methodologies—but has also attended depositions, jury trials, and bench trials. The practitioner will also understand business valuation (BV) standards. This requires commitment, effort, and time. This article provides an overview of points shared by James Hitchner in his July13, 2021 webinar, “Providing Expert Testimony in Business Valuation: What to Watch…
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Fraud Issues in the Hospitality Industry Post-COVID-19 Pandemic The hospitality industry is already experiencing an increase in fraud, and everyone associated with the business—including operators, owners, managers, employees, and even guests—is at risk of being affected. In this article, the author identifies areas of fraud and provides recommendations to mitigate risk. As a self-proclaimed foodie, I am excited that we will once again be able to go to restaurants and hotels. However, as a forensic accountant I am concerned for the hospitality establishments that, of necessity, focused on sustaining business and staff over back-office matters such as internal financial controls.…
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The Future of Main Street Business Succession In 2001, veteran investment banker, Peter Christman, first identified the need for a holistic approach to preparing owners of midmarket businesses for sale and/or exit. He set about writing a book to address this. At the time, the first Baby Boomer was 56 years of age. Those Baby Boomers are now not so young. In this article, the author shares his impression of the challenges Main Street business owners and business succession advisors face developing a plan and executing the exit plan. A Brief History Depending on how you mark the start date,…
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Pearls Clutched and Loaded Have you ever read an opposing expert’s rebuttal of your expert report that left you clutching your pearls the rest of the day? With over 2,000 cases under my belt, I have had some true works of fiction written about me and still can be found clutching my proverbial pearls from time to time. This ninth article of the Unimpeachable Neutrality series discusses how to quell the no good, naysaying, disingenuous opposing expert rebuttal report. Have you ever read an opposing expert’s rebuttal of your expert report that left you clutching your pearls the rest of…
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That You Think Still Work What are the most effective ways to market professional services? In this article, Rod Burkert shares the four worst ways to get new clients. We all know the “generally accepted” marketing techniques to create referral opportunities that can lead to new clients. We also know the mileage of different techniques can vary. What if I could tell you the worst (and best) ways? Backed up by research? Well, I can. Because a while back, I attended Hinge Marketing’s Referral Marketing for Financial and Accounting Firms webinar. Hinge surveyed 1,691 referral sources in professional service firms…
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And S Corporation Acquisitions Analysts should be aware that one transaction tax structure that is particularly popular regarding private equity firm acquisitions is an Internal Revenue Code Section 368(a)(1)(F) reorganization of the private S corporation. The article discusses several of the reasons why owners may want to sell—and why private equity firms may want to buy—an S corporation target company. The article describes what analysts need to know about the benefits to the S corporation sellers of a Section 368(a)(1)(F) reorganization as one step in the private company sale transaction. In addition, it also describes what analysts need to know…
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The Dark Web Criminals Both the Financial Crimes Enforcement Network (FinCEN) and the U.S. Department of Treasury’s Office of Foreign Assets Control (OFAC) have issued recent advisories concerning ransomware payments. This article provides an overview of those advisories. Both the Financial Crimes Enforcement Network (FinCEN) and the U.S. Department of Treasury’s Office of Foreign Assets Control (OFAC) have issued recent advisories concerning ransomware payments.[1] Ransomware attacks occur when a cyber actor uses malicious software (“malware”) to block access to a computer network or data, and offers to restore access in exchange for payment of ransom. Ransom is generally demanded in…
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The Evolution of Digital Forensics and Growth of the Industry The rapid growth of technology has resulted in the computer age, which has given rise to cybercrimes. Savvy criminals today use devices such as tablets, computers, smartphones, and cloud storage in the planning and commission of cybercrimes, whether to wreak havoc in the system of an organization or in the commission of a crime of self-enrichment. According to McAfee, global losses from cybercrime in 2019 exceeded $1 trillion, which was a 50% increase over 2018. These major challenges have been met by cyber sleuths, who are trained in the collection…
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A Data Analytics Approach The valuation of minerals and renewables falls outside the usual guidelines of real property appraisal, where real property broadly defined includes land, everything permanently attached to it, at, above, and below the earth’s surface and all the interests, benefits, and rights inherent in the ownership collectively referred to as “the bundle of sticks”. This is because most appraisers commonly value land, houses, ranches, surface structures, and businesses. Sub surface real property appraisals is more specialized where appraisers usually value royalty income based on production from reservoirs beneath the surface. This article provides an overview of the…
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How Does it Work? Everyone seems to be talking about cryptocurrency these days, but many are unsure how to define it and fewer still, know exactly how it works. Cryptocurrency is a digital construct without physical substance; the only evidence of its existence is the digital record or ledger indicating balances held (like a balance sheet) and transactions that have occurred (like an income statement). What follows is a basic primer on how cryptocurrency works and how it differs from physical currencies. Everyone seems to be talking about cryptocurrency these days, but many are unsure how to define it and…