Category Archives: Valuations

Discount for Lack of Marketability

March 8, 2016 | Financial Planning, Valuations

One of the most contentious issues in business valuation is the discount for lack of marketability (DLOM). Reasons include that the DLMO varies significantly, depending on the rights and restrictions attached to the business interest, and also because it can lower a business interest’s value by as much as 35% or more. Here’s more on  Continue Reading »

Discovery Reveals Expert’s Lack of Independence

March 7, 2016 | Court Rulings, Valuations

TWC I, L.L.C. v. Damos, 2015 Iowa App. LEXIS 438 (May 20, 2015) It does not pay to fudge on an expert report. That’s the message from a court in a state statutory appraisal action in which discovery evidence cast doubt on the expert’s truthfulness and independence. Arm’s-length transaction: When a broker raised the possibility  Continue Reading »

Court Infers Nature of Goodwill From Nature of Business

February 23, 2016 | Court Rulings, Divorce Litigation, Valuations

Rabe v. Rabe, 2015 Ky. App. Unpub. LEXIS 379 (May 29, 2015) An opinion in a divorce case from the Kentucky Court of Appeals, although unpublished, merits attention because it shows the court ruling on the nature of goodwill in a business valuation based merely on the type of business at stake. The opinion also  Continue Reading »

Value is in the Eyes of the Beholder

February 23, 2016 | Business Plans, Financial Planning, Valuations

Maine business owners are often surprised when they receive their valuation report from a hired appraiser. Often times the expert is hired to determine the fair market value of a business interest for, say, divorce or gift and estate tax purposes, and the client wonders, “Is this all I would receive if I were to  Continue Reading »

Three Approaches to Valuing a Business

February 9, 2016 | Valuations

Valuing a private business is a complex process, but most closely held business owners want to know the value of their investments, especially if they are going to sell or gift shares to family members or charities. It is vital to hire a valuation professional who understands the current marketplace and the relevant value drivers for your business.  Continue Reading »

Expert Rebuttal Fails to Engage With Initial Valuation

February 9, 2016 | Court Rulings, Valuations

Clear-View Techs., Inc. v. Rasnick, 2015 U.S. Dist. LEXIS 72601 (June 3, 2015); Clear-View Techs., Inc. v. Rasnick, 2015 U.S. Dist. LEXIS 71990 (June 2, 2015)  In an intellectual property case, the court determined what qualifies as admissible rebuttal testimony under Rule 26 of the Federal Rules of Civil Procedure. The defendants failed to designate  Continue Reading »

Estimating Replacement Compensation in Divorce

February 5, 2016 | Divorce Litigation, Financial Planning, Valuations

During a divorce, when either spouse owns a private business interest, the divorce settlement is only as reasonable as the value of the business and the compensation of its owners. Replacement compensation can become a controversial issue, especially when the spouse owns a private business and has the control to set his or her salary, benefits  Continue Reading »

How Elements of Control Affect Value

January 26, 2016 | Business Plans, Valuations

“The whole is greater than the sum of its parts.” This is a common phrase, but it’s not as common for businesses to realize that this same theory can apply in the valuation of interests in a business. Controlling Interest is Valuable A publicly traded business is often purchased for a greater value on a  Continue Reading »

Chancery Savages Accounting Firm Over Manipulated Valuation

January 25, 2016 | Court Rulings, IRS Regulation, Valuations

Fox v. CDx Holdings, 2015 Del. Ch. LEXIS 194 (July 28, 2015) The Delaware Court of Chancery has on numerous occasions called out major financial institutions for providing erroneous or even “motivated” valuations. But few opinions include more searing criticism than a decision from Vice Chancellor Laster, in which he said a major accounting firm’s  Continue Reading »

A Closer Look at the Excess Earnings Method

January 24, 2016 | Court Rulings, Divorce Litigation, Valuations

Valuation experts often criticize the Excess Earnings Method, calling it ambiguous, over-simplified or outdated. But it’s still used in some jurisdictions as a way to value small businesses and professional practices, especially in a divorce setting. The method was originally created to compensate wineries and distilleries during Prohibition. The Excess Earnings Method is the subject of IRS Revenue Ruling  Continue Reading »