Category Archives: Valuations

The Market Approach: A Touchstone in Valuation

May 29, 2015 | Financial Planning, Valuations

Using the market approach, appraisers use comparable guideline companies to help reach an estimate of the value of a business. It has become a long-standing valuation touchstone. There are two primary valuation methods that fall under the market approach: Guideline public company method. With this method, appraisers select companies that actively trade stock or partnership  Continue Reading »

Averaging Multiple Appraisals Yields Most Reliable FMV

May 28, 2015 | Valuations

Perez v. Bruister, 2014 U.S. Dist. LEXIS 148314 (Oct. 16, 2014) An appraiser of dubious background proved to be a linchpin in a complex ESOP case that centered on allegations from the Department of Labor and individual plaintiffs against the plan’s trustees for buying stock above its fair market value. In an undertaking full of  Continue Reading »

Converting Future Damages to Present Value

May 19, 2015 | Valuations

Small businesses may need a skilled valuation expert for several different reasons, but one of them is to calculate damages. A good valuator can discount future damages to present value, providing the ammunition businesses need to receive a just award. For illustration purposes, consider the following example. Say a company fires an employee for stealing  Continue Reading »

New Twist to Debate on Discounts in Fair Value Proceedings

May 13, 2015 | Court Rulings, Valuations

Much of the valuation community’s attention in the past few months has focused on New York fair value proceedings. Now the Utah Supreme Court adds more fodder to the discussion with a decision that rejects the lower court’s reliance on precedent that prohibits deductions for lack of marketability and tax liabilities. ‘Everything for sale’ strategy  Continue Reading »

Goodwill: Personal or Business, and Why Does It Matter?

May 4, 2015 | Valuations

Goodwill is one of the most valued assets for many small businesses. It exists among many different types of companies, from professional service firms to retailers to manufacturers. To place a value on this important piece of a business’ puzzle requires a valuation professional. Typically, goodwill has been broken down into two parts: Business (or  Continue Reading »

Court Deems Treatment of S Corp Undistributed Income ‘Problematic’

April 27, 2015 | Divorce Litigation, Valuations

Diez v. Davey, 2014 Mich. App. LEXIS 2041 (Oct. 23, 2014) How does the law treat undistributed income from a parent’s S corporation for purposes of determining child support? This was the central question in a recent child custody case. The lower court relied on expert testimony that attributed to the owner parent income based  Continue Reading »

Harsh Ruling Due to Faulty Value Allocation in a Merger

April 14, 2015 | Court Rulings, Valuations

Cavallaro v. Commissioner, 2014 Tax Ct. Memo LEXIS 189 (Sept. 17, 2014) So much for professional help! Hardworking taxpayers who built a successful business relied on estate planning professionals to effect a transfer of wealth that would minimize their tax liability. The resulting merger of two family businesses led to an IRS deficiency notice alleging  Continue Reading »

Valuation Issues to Address in a Buy-Sell Agreement

April 2, 2015 | Business Plans, Valuations

Buy-sell agreements help protect small businesses with multiple owners if an owner dies, becomes disabled or chooses to leave the company. They should dictate who can buy the departing owner’s interest, when, how and for how much. It’s best if these contracts are created when a business is started, but they can always be entered into or  Continue Reading »

High Valuations Complicate Division of Sizable Marital Estate

March 31, 2015 | Divorce Litigation, Valuations

Crider v. Crider, 2014 Ind. App. LEXIS 416 (Aug. 26, 2014) In a recent divorce case involving a series of family businesses in which the husband owned interests, the trial court faced considerable hurdles to arrive at a valuation of the marital estate. A small army of experts gave conflicting opinions on how to account  Continue Reading »

Valuation Combines Elements of Rival Experts’ Cash Flow Analyses

March 5, 2015 | Valuations

Browne v. Browne, Jr., 2014 Tenn. App. LEXIS 521 (Aug. 27, 2014) Another instance of “splitting the baby”? In a divorce proceeding, both experts used the capitalization of cash flow method but reached vastly different results in valuing the husband’s closely held company. One key difference was the cap rate, which they both generated with  Continue Reading »