This month's issue of Valuation & Litigation Advisory Insights includes the following articles:
FAQs About Business Valuations
From business acquisitions to estate planning to shareholder transactions, executives often run into situations in which performing a business valuation is necessary.
The primary pressure point is when it is necessary to determine the value of an ownership interest in a private company (non publicly-traded) for any number of financial and business reasons. Not anything that is traded on exchanges; we're talking about closely-held companies and small businesses.
Click here for the answers to these FAQs:
- In what scenarios would a business valuation be needed?,
- What are some critical factors in determining the value of a business?
- Do values change over time?
- How can valuation discounts impact the value of a business?
- Who typically performs business valuations?
- Why are credentials important?
Measuring the Intangible: Valuation Issues in Health Care Transactions
In the highly complex and heavily regulated world of health care, business valuations can be particularly challenging. This article looks at a recent U.S. Tax Court decision, Derby v. Commissioner, that illustrates this point. The case involved the sale of a medical group to a not-for-profit health care organization. The group claimed charitable tax deductions resulting from the transaction but the Tax Court denied the deductions, concluding that the physicians were unable to show that the value of what they received was less than the value of what they transferred. The article discusses the ins and outs of the case, noting that the court's decision demonstrates that valuation in the context of a health care transaction requires a valuator to look at intangible benefits and other relevant terms of the deal.
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Single Price Quote Supports $10 Million Lost Profits Award
A U.S. Court of Appeals affirmed a jury award of nearly $10 million in lost profits. Notably, the plaintiff's damages expert based his calculation on a single price quote by the plaintiff that had never been accepted by the defendant. This case confirms that companies are entitled to compensatory damages not only for designs and other confidential information they develop, but also for the profits their intellectual property is expected to generate.
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Skoda Minotti Employee Recognized For Outstanding Report Writing by National Association of Certified Valuation Analysts
We are pleased to announce that Sean Saari, CPA/ABV, CVA, MBA has received the 2010 Jeffrey R. Salins Report Writing Award from the National Association of Certified Valuation Analysts (NACVA).
Click here to read the rest of this release.
Prior issues are available in the E-Newsletter Archive of our Valuation & Litigation Advisory Services Resource Center. If you would like to subscribe to this free, monthly, business valuation and litigation support e-newsletter, send an email to info@skodaminotti.com.
If you have any questions about any of these articles, post a comment below or please contact our Valuation & Litigation Advisory Services Group at 440-449-6800.
This month's issue of Valuation & Litigation Advisory Insights includes the following articles:
New expert discovery rules should reduce litigation costs
This article discusses proposed amendments to the Federal Rules of Civil Procedure that will likely have a big impact on the attorney-expert relationship. One of the most significant changes is amended Rule 26, which will extend attorney work-product protection to draft reports by testifying experts and, with certain exceptions, to communications between experts and retaining counsel. It’s hoped that this will avoid needless discovery costs.
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Zubulake revisited: New guidance on e-discovery
A recent court case shows that sanctions can not only be awarded for deliberate destruction of discoverable data, but also when a party is grossly negligent. The court found that "failure to issue a written litigation hold constitutes gross negligence…." A sidebar to this article lists specific examples of gross negligence.
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How the recession has impacted business valuation
Should businesses that were valued on the eve of the economic downturn be revalued in light of subsequent events? This article looks at a Florida marital dissolution case in which a restaurant valued in December 2007 lost value during the recession that followed. This case confirms that, when valuing a business, appraisers generally shouldn’t consider events that take place after the valuation date. A sidebar examines Financial Accounting Standards Board standards regarding the treatment of subsequent events for accounting purposes.
Click here to read this article.
Prior issues are available in the E-Newsletter Archive of our Valuation & Litigation Advisory Services Resource Center. If you would like to subscribe to this free, monthly, business valuation and litigation support e-newsletter, send an email to info@skodaminotti.com.
If you have any questions about any of these articles, post a comment below or please contact our Valuation & Litigation Advisory Services Group at 440-449-6800.
This month’s issue of Valuation & Litigation Advisory Insights includes the following articles:
Nonqualified deferred compensation: Independent appraisals offer protection against 409A challenge
Businesses that provide employees with stock options, stock appreciation rights (SARs) and other types of nonqualified deferred compensation have been subject to Internal Revenue Code Section 409A for years. As you can imagine, compliance is particularly challenging in the current economic environment. To avoid Sec. 409A problems, options and SARs must be issued at or above fair market value, so accurate valuations are critical. It’s important to know what Sec. 409A requires and how to establish fair market value. Three "presumptive" valuation methods are discussed.
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Damage control: Surviving a business interruption
Whether it’s minor, such as a lightning strike that shuts down production for a day, or major, such as a lengthy labor strike, a business interruption not only reduces income, but also simultaneously creates new expenses. The key to surviving a business interruption is to restore normal operations as quickly as possible. Insurance plays a critical role. This article explains business interruption insurance, how to file a claim, what to do to mitigate loss, and how to establish a loss period. A sidebar addresses scope-of-coverage issues.
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"Fair value" in a troubled economy
Last year, Financial Accounting Standards Board (FASB) Statement of Financial Accounting Standards (SFAS) No. 157 took effect. The statement, entitled Fair Value Measurements, provides guidance on measuring fair value for purposes of several accounting standards, and establishes a "fair value hierarchy" that emphasizes market-based valuation methods. This article explains how it works. A sidebar discusses a few opportunities to explore in this down economy.
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Prior issues are available in the E-Newsletter Archive of our Valuation & Litigation Advisory Services Resource Center. If you would like to subscribe to this free, monthly, business valuation and litigation support e-newsletter, send an email to info@skodaminotti.com.
If you have any questions about any of these articles, post a comment below or please contact our Valuation & Litigation Advisory Services Group at 440-449-6800.
This month’s issue of Valuation & Litigation Advisory Insights includes the following articles:
Lucent Sheds Light on Patent Infringement Damages
Courts are generally loath to disturb a jury’s verdict on damages. But an appeals court threw out a $350 million patent infringement award that wasn’t supported by substantial evidence. This case illustrates the need for detailed expert testimony, which will establish credible evidentiary facts and conclusions and, thus, support a claim for patent infringement damages.
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Valuing Pass-Through Entities vs. C Corporations
Valuing interests in pass-through entities can be deceptively complex. This complexity stems from a mismatch between the data commonly used to value privately held companies and the tax benefits associated with pass-through entities. But, in recent years, several analytical models have been developed which provide a more accurate picture of a pass-through entity’s economic benefits.
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What’s behind the veil? Digging for the truth in alter-ego cases
When a plaintiff can’t collect a judgment from a corporation and seeks to obtain it from the corporation’s owners, it may try to show that the corporation and its shareholders lack separate identities — that is, the corporation is the owners’ alter ego. Key factors in determining an alter-ego relationship include not only this lack of separateness, but also financial dependence of the corporation upon its shareholders or parent, and undue influence upon a corporation.
Click here to read this article.
Prior issues are available in the E-Newsletter Archive of our Valuation & Litigation Advisory Services Resource Center. If you would like to subscribe to this free, monthly, business valuation and litigation support e-newsletter, send an email to info@skodaminotti.com.
If you have any questions about any of these articles, post a comment below or please contact our Valuation & Litigation Advisory Services Group at 440-449-6800.
This month’s issue of Valuation & Litigation Advisory Insights, includes the following articles:
Struggling Economy Presents Business Valuation Challenges
In bad times, appraisers may face a disconnect between the income and market approaches, creating a wide gap between valuations. The challenge becomes reconciling these differences. This article explains how to approach valuation for both profitable and distressed companies, and notes that the purpose of a business valuation can have a big impact on the valuation methods that are used. A sidebar looks at one case in which a court rejected the uses of the discounted cash flow method by both the creditors’ and the debtors’ experts.
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Nonpublic Information Considered in Valuing Securities
In one recent case, a district court held that it was reasonable for a jury to conclude that material nonpublic information possessed by the defendants affected the fair market value of certain securities. The case is significant because it seems to offer a novel interpretation of the phrase "reasonable knowledge of relevant facts" in the definition of fair market value. The decision suggests that even nonpublic information can be a "relevant fact."
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Are Valuations Recyclable?
The paper a valuation report is printed on may be recyclable, but in most cases the content is not. This article points out that recycling valuations poses two major problems: First, the value of a business or other asset can change dramatically over time — in some cases, overnight. Second, a valuator’s methods depend to a large extent on the valuation’s purpose. The article discusses the problems that can ensue when business owners are tempted to stretch their valuation dollars by using a single valuation for several different purposes.
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Prior issues are available at our E-Newsletter Archive. If you would like to subscribe to this free monthly e-newsletter, send an email to info@skodaminotti.com.
If you have any questions about any of these articles, post a comment below or please contact our Valuation & Litigation Advisory Services Group at 440-449-6800.
This month's issue of Valuation & Litigation Advisory Insights includes the following articles:
IP Valuation Using the Relief From Royalty Method
In today's business environment, the valuation of intellectual property (IP) is critical - both to comply with accounting rules and for purposes of financial reporting, tax compliance, litigation, or sale or licensing transactions. Several methods can be used to value IP. One of the most effective can be the relief from royalty (RFR) method. This income-based method estimates the portion of a company's earnings attributable to an IP asset based on the royalty rate the company would have paid for the use of the asset if it didn't own it.
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Valuation Critical Under New M&A Rules
Sweeping changes to the accounting rules for mergers and acquisitions (M&A) will start affecting many companies that are closing deals this year. FASB SFAS No. 141(R), Business Combinations, was issued in late 2007, but it applies to deals closing on or after the first day of the first annual reporting period beginning after Dec. 15, 2008. This article explains how many of the changes prescribed in this 358-page document increase the importance of having accurate valuations.
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Putting a Price on Technology
Valuing technology-related intellectual property (IP) can be an enormous challenge for lawyers and valuation experts. It considers the degree of legal protection associated with technology IP as well as the economic benefits a company is expected to derive from that protection. Typically, valuation experts analyze the various economic benefits associated with a technology IP asset separately, and will use different approaches depending on whether a patent is associated with developed technology, in-process research and development, or future technology. There are a variety of contexts in which the need to value technology IP can arise.
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Prior issues are available at our E-Newsletter Archive. If you would like to subscribe to this free monthly e-newsletter, send an email to info@skodaminotti.com.
If you have any questions about any of these articles, post a comment below or please contact our Valuation & Litigation Advisory Services Group at 440-449-6800.
This month's issue of Valuation & Litigation Advisory Insights includes the following articles:
Constructing a Claim for Lost Productivity Damages
Quantifying the cost of lost productivity when a construction project is disrupted through no fault of the contractor is a difficult challenge. An unanticipated disruption of the project typically causes the contractor to work less efficiently, which can lead to additional labor, equipment and material costs. This article explains that appraisers can use several methods when quantifying lost productivity damages, depending on the particular job’s facts and circumstances and also notes that lawyers and damages experts need to work together closely to establish lost productivity and measure it appropriately.
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Marketability discounts: Appraisers relying less on empirical study averages
With the widespread availability of public market databases, spreadsheet software and other analytical tools, valuators are no longer relying solely on empirical study averages to determine marketability discounts. They’re now placing greater emphasis on how to identify what truly affects marketability and how to better match empirical data to the specific attributes of each subject company. However, though pre-IPO and restricted stock studies may be somewhat under siege, their data is still worthwhile. Research has generated several insightful hypotheses.
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Clues abound: The tax return as an investigative tool
Tax returns can be a highly effective investigative tool in fraud and divorce cases, shareholder litigation, and other situations in which a defendant may have hidden assets. In fact, virtually every page of a tax return can provide clues to hidden assets. Income from wages, taxable refunds of state or local taxes, and retirement plan distributions are just a few of the items on a 1040 that a valuator will review.
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Prior issues are available at our E-Newsletter Archive. If you would like to subscribe to this free monthly e-newsletter, send an email to info@skodaminotti.com.
If you have any questions about any of these articles, post a comment below or please contact our Valuation & Litigation Advisory Services Group at 440-449-6800.
In the fourth quarter or 2009, Northeast Ohio saw a decrease in vacancy rates and an increase in net absorption, indicating that things may be turning around. When the economy will fully recover, though, has yet to be determined with certainty, and real estate companies are still suffering from various challenges including the absence of credit and the economic loss in the value of underlying real properties. Companies can adapt to these challenges and survive in this market, though; click here to learn more.
For more information, post a comment below or contact our Real Estate and Construction Group at 440-449-6800.
With the recent declines in the real estate market, it is important that you ensure your commercial property is valued correctly for real estate tax purposes. In 2009, many Ohio counties reappraised or updated their real property values for the tax year. These new valuations apply through 2012.
Despite the declining real estate market, it is our understanding that most tax values for commercial properties were not lowered for the 2009-2011 tax years in many Ohio counties. Owners of commercial property have until March 31, 2010 to contest the new valuations.
If you own high value properties (office; industrial; apartments) we encourage you to review these updated tax values. We would be glad to discuss with you if a challenge makes sense and also refer you to legal professionals who are equipped to handle these matters.
Please contact our Litigation Advisory Services Group at 440-449-6800 if you have any questions regarding this matter.
This month's issue of Valuation & Litigation Advisory Insights includes the following articles:
- Finding the Appropriate Valuation Standard
- How Valuators Assess the Rising Risk of Fraud
- Lost Profits or Lost Value?
Finding the Appropriate Valuation Standard
Valuation isn't static and can change depending on the purpose of the valuation. This article looks at the three most common standards of value: fair market, investment and fair. It briefly defines each standard and discusses the circumstances in which one standard may be more appropriate than another. The article points out that identifying the appropriate valuation standard up front can minimize confusion down the road. The goal is to arrive at a reasonable and supportable value conclusion in light of all the surrounding facts and circumstances.
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How Valuators Assess the Rising Risk of Fraud
The current economic downturn has produced an upswing in incidents of occupational fraud, so it's imperative for businesses to step up efforts to deter and detect it. An important part of the valuation process is identifying potential risks and gauging whether management has taken appropriate action to mitigate those risks. This article explains how valuators evaluate internal controls and corporate culture, tailoring their analyses of fraud risks based on the subject company's size, complexity, industry and goals.
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Lost Profits or Lost Value?
Lost profits and lost business value are common measures of damages in commercial litigation. They're also a common source of confusion. What do they have in common? How are they different? Can a plaintiff recover both? This article addresses these questions. A basic understanding of the similarities and differences between lost profits and lost business value can help build a case for business damages or challenge an opponent's calculations.
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Prior issues are available at our E-Newsletter Archive. If you would like to subscribe to this free monthly e-newsletter, send an email to info@skodaminotti.com.
If you have any questions about any of these articles, please contact our Valuation & Litigation Advisory Services Group at 440-449-6800.
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