Link to About American Business Appraisers, LLP of San Francisco Link to Business Valuation Services Link to Litigation Support Services Link to Business Consulting Services Link to Valuation Seminars Link to the Home Page of American Business Appraisers, LLP of San Francisco
American Business Appraisers, LLP of San Francisco
Link to Business Valuation Articles Link to Business Valuation Case Studies Link to Testimonials from Clients Link to a Sampling of Completed Transactions
 
         

  Mediation-Valuation Gives Parties Chance to Settle
Parties ”work-through” Valuation to Reach Compromise

Many attorneys call to ask for a “ball-park number” on the value of a small business or professional practice. After explaining that professional standards do not permit appraisers to give “ball-park” estimates of value, we can often offer an alternative to complex and expensive full-blown appraisals. Where the parties are emotionally and financially ready to settle the dispute, the trained and credentialed business appraiser can often offer a combination of mediation, teaching, and facilitated discussion that can lead to a workable solution. Read the full article…


  Is This the Time to Sell a Business?
Intermediary is Key to Preparing Business for Sale

Buying or selling a business in today’s environment is like rolling dice on a moving table - it’s an uneven proposition at best. Both buyers and sellers are uncertain about the values of small and closely-held businesses and wonder whether they are likely to get value for their dollar. There is broad feeling afoot that the volatility in U. S. equity and capital markets during the past several years has caused major shifts in shareholder value for both public and privately held companies. It’s simple enough for shareholders of publicly traded shares to test this by reading the Wall Street Journal. Read the full article…


  Good Business Intermediaries Can Attract the Right Investors

Institutional Capital can help owners create significant value that might not have been achieved otherwise. Many intermediaries have access to many investor groups. This allows them to assess the best fit for your company. Getting the best deal for your business means putting your company’s best foot forward with prospective purchasers. Usually the intermediary develops the offering memorandum, which becomes the primary marketing tool for your business. Read the full article…


  Marketability Misconceptions

The notion of a discount to value based on the marketability of the subject property has been around for a long time, and is based in fundamental proposition that the market craves liquidity and loathes the absence of it. All else equal, a liquid (marketable, as if freely traded) investment should be worth more than an illiquid (less marketable, not freely traded) one. Actual performance of the market clearly demonstrates this phenomenon. Read the full article…


  More Marketability Misconceptions

Once the appraiser decides that an adjustment for lack of liquidity/adjustment for difference in degree of marketability (the marketability discount) is necessary, the next step is to estimate the size of the discount. Usually these discounts are expressed as a percentage taken away from the “as if freely traded” value of the enterprise, so a 25% marketability discount indicates the closely held subject interest is worth 75% of its “as if freely traded” value. Read the full article…


  What’s Up with Revenue Ruling 59-60?

Revenue Ruling 59-60 is the primary ruling providing guidance f or the valuation of closely held common equity interests. When issued in 1959, the ruling specifically referred to valuing “… the stock of closely held corporations where market quotations are not available.” Read the full article…


  In re: Marriage of Hewitson

[142 Cal.App.3d 874, 191 Cal.Rptr. 392 (1983)]
In valuing closely-held stock appraisers should consider each of the eight factors set forth in Revenue Ruling 59-60.


This 1983 case asking the Second District Court of Appeal to address the issue of determining the value of closely–held stock that is part of the marital estate set forth several seminal rules, not the least of which is that the trial court may rely on “investment value” rather than “market value” in determining the value of the marital estate pursuant to then Civil Code §4800, though neither of these terms is clearly defined. Read the full article…


  Selecting a Business Appraisal Firm
Bigger isn’t always better

While professional appraisal credentials in real estate appraisal have been around for decades, professional designation in Businesses Appraisal is a more recent development.
Selecting a business appraiser for litigation, whether it’s a family law matter, estate planning, partnership dispute, failed transaction, or Corp. Read the full article…


  Forensic Accounting in Divorce Matters

Divorce is unique in that the motivations to be less than honest are often more complicated than the typical financial crime motivated purely by financial gain. In a divorce, a spouse may have the desire to “cheat” his or her spouse out of their “fair share” of the marital property or humiliate, emotionally overwhelm or otherwise damage their spouse. Read the full article…


  Standard of Value is Everything!
Standard of Value Represents the Key Assumption of the Appraisal

The Standard of Value (archaically called the Definition of Value) assumed by the appraiser is the fundamental assumption under which the valuation proceeds. It represents the most basic instruction from the client to the appraiser, and tailors the valuation analysis to the requirements of the users of the appraisal. There are several typical standards of value commonly used by business appraisers: Fair Market Value, Fair Value, Investment Value, and a few specialized standards of value. Read the full article…


  Why is the Date of Valuation Important?

In fact, in our experience, it seldom is. But when there are unusual circumstances, the date of valuation can be as critical as the Standard of Value imposed. Read the full article…


  In re: Marriage of Duncan
Use of Alternative date of valuation under Family Code §2552(a) proper where professional post-separation efforts result in increase in value of community-owned business.

This 2001 case out of San Diego addressed the question of whether an alternative date of valuation under Family Code §2552(a) requires that the change in value be related entirely to the post-separation efforts of the managing spouse. Read the full article…


  Why do we take a Minority Discount?
Value of Minority Interest is Lower Because of Lack of Control

It comes as a surprise to many that a minority interest in a privately held company is worth less than its proportionate share of the company taken as a whole. These people often think that a 15% interest in a company that is worth $1,000,000 should be worth $150,000. This is a sometimes hazardous notion. Read the full article…


  What’s the Difference Between a Control Premium and a Minority Discount?

Both the Control Premium and the Minority Discount are really internal calculations used by the appraiser to match the control characteristics of the subject property (i.e. whether or not it comprises a controlling interest) to the source of information from which the value is determined. Read the full article…


  What is “Fair Value” Anyway?

The definition of value is critical to the correct application of the law, especially in the case of shareholder dissent or minority oppression actions. Fair Value has seldom been defined clearly in statute, and can vary from jurisdiction to jurisdiction. Read the full article…


  Mart v. Severson - [2002 DJDAR817]
Appraisers should assume reasonable terms in sale of Company as a going-concern in liquidation.

This 2002 case out of the First Appellate District (San Francisco) speaks to the assumptions applied by business appraisers in a Corp. Code §2000 valuation, and clarifies the proper role of the trial Court in setting the price to be paid by the controlling shareholders to the unhappy minority shareholders. Read the full article…


   ABCs of Appraiser Credentials
Not all Appraisal Designations are Created Equal.

While professional appraisal credentials in real estate appraisal have been around for decades, professional designation in Businesses Appraisal is a more recent phenomenon. It’s been less than thirty years since the Institute of Business Appraisers (IBA) was formed and since the American Society of Appraisers (ASA) officially recognized business valuation as a separate appraisal discipline. Since that time a number of other organizations, likely seeking to capitalize on the emergence of BV as a fee-producing technical specialty and hoping to siphon off some of the fee revenues to the troubled Public Accounting profession, have jumped into the alphabet soup of professional designations. Read the full article…


   “Core Earnings” Measure Alters Landscape
New Measure of Profitability will bring honesty to Corporate Earnings

In late May of 2002 Standard & Poor's published a set of new definitions it will use to evaluate corporate earnings. Read the full article…


  What is USPAP?

Following the failure of the savings and loans institutions in the mid-80s, which Congress blamed partly on unethical real estate appraisers, the several real estate appraisal societies formed the Appraisal Foundation for the purpose of self-governance of the appraisal profession. Read the full article…


  How Much Should a Business Appraisal Cost?
Price Driven by Purpose of the Appraisal, Professional Standards, Appraiser Overhead

Like any other professional service, such as legal services, medical care, financial advisory services, or accounting services, the price of appraisal services to the ultimate user should always be one consideration in selecting the professional or professional firm. However, it’s usually not appropriate to shop for the lowest priced vendor, or to use competitive bidding to obtain the lowest price. The heart patient whose life may depend on the skill and judgment of his surgeon, wouldn’t be smart to put his surgery out to bid. Similarly, the client whose financial fortunes may rely on the quality of work or the effectiveness of testimony by his valuation expert should probably not make a decision on hiring an appraiser based primarily on lowest fees. Read the full article…


  What is Investment Value Anyway?

The International Glossary of Business Valuation Terms defines Investment Value as “The value to a particular investor based on individual investment requirements or expectations.” The Guide to Business Valuation Glossary adds the phrase “...as distinguished from the concept of market value, which is impersonal and detached.” Read the full article…


  Mediation-Valuation gives parties opportunity to “work-through” valuation to reach compromise

Many attorneys call to ask for a “ball-park number” on the value of a small business or professional practice. After explaining that professional standards do not permit appraisers to give “ball-park” estimates of value, we can often offer an alternative to complex and expensive full-blown appraisals. Where the parties are emotionally and financially ready to settle the dispute, the trained and credentialed business appraiser can often offer a combination of mediation, teaching, and facilitated discussion that can lead to a workable solution. Read the full article…


  What is Forensic Accounting?

The term “forensic” conjures images of pathologists, crime scenes and the morgue. Forensic accountants and forensic criminologists do, have a common denominator … the pursuit of evidence that will stand the scrutiny that the rules of evidence and procedure demand for admission as evidence before a court. The forensic pathologist examines and probes and reviews evidence to determine the cause of death and to answer the question “What happened?” Similarly, a forensic accountant digs through a financial problem to determine “What happened to the money?”. Read the full article…
  Current Lessons for U.S. Equity Investors     
Overpaid CEOs, Unethical Officers and Consultants Betray Investors

Million of American investors, many of them older people on fixed incomes who rely on income from stock investments, lost a major part of their wealth in 2002. This wasn’t a random movement in the market or a cyclical change, it was due to the outright malice of a number of bad-actors, and a system designed to protect them, that failed How does it look at the beginning of 2004? Read the full article…


  Apportionment Methods - Pereira-VanCamp
Analysis Measures Potential Community Interest in Separate Business Property

Case Study: Our client, Jones owned a computer circuit board fabrication and manufacturing company at the time the parties’ marriage in 1992. He was president of the Company and worked full-time running the Company during the marriage and held the same ownership interest at the time the parties separated, in 2000. Wife asserted that the community was entitled to apportionment of the increase in value of the husband’s separate property interest in the Company because husband had provided the Company with his community labor during the term of the marriage. Read the full article…
  Highest and Best Use...

While teaching, a student who has been appraising real estate for years, recently asked “why business appraisers rarely discuss the concept of “highest and best use”. An excellent question. Read the full article…


  Minority Shareholder Oppression – Fraud Investigation
Family Law

We are often asked to provide forensic accounting services in the course of work in the area of family law and in shareholder/partnership disputes. This work is often associated with a business valuation assignment, but as often as not, involves a detailed review of the accounting and financial records to uncover to prove wrongdoing by one of the parties. Read the full article…


  What's Real?
Are you dealing with Nominal or Real Wages ...

What's the Difference Between Nominal and Real?

As litigation support specialists, we are often asked "What's the difference between nominal and real?" Terms like “real inflation rate”, “real interest rate”, “nominal inflation rate”, ”nominal interest rate” “nominal wages” and “real wages” are frequently mentioned in media reports on the economy, as well as in business valuation and economic loss and damage calculation reports. Read the full article…


  Report Types and Level of Service
Different USPAP reports have different uses.

ABA principals are credentialed certified business appraisers. By both choice and professional requirement, ABA performs work and reports results pursuant to the requirements of the Uniform Standards for Professional Appraisal Practice (“USPAP”). Not all business appraisers do so. Read the full article…


  Testimony and the Valuation Expert

We are increasingly being called to assist attorneys or the court in various litigation matters. Business valuations are frequently required in the following circumstances:

•   in disputed family law matters when one or both spouses are owners of a closely held        business,
•   in estate planning with the establishment of Family Limited Partnerships,
•   for estate tax returns when there is a closely held business owned (partially or wholly)      by the deceased,
•   in contested estate matters,
•   in lost profit or “but for” calculations,
•   in business interruption insurance claims,
•   in shareholder or partnership disputes and
•   in lender liability issues

The valuation expert must have a working knowledge of finance, accounting, economics, and marketing. Credentials are very important and often overlooked in selecting a valuation expert. CPA’s without the ABV designation (the AICPA grants the Accredited in Business Valuation) pose a Daubert risk at trial. There are two other professional valuation designations that are widely recognized as signifying a qualified business appraiser, the ASA (Accredited Senior Appraiser) designation (granted by the American Society of Appraisers and the CBA (Certified Business Appraiser (granted by the Institute of Business Appraisers. All of these designations require an experience requirement, extensive training, continuing education, peer review, and a rigorous examination.

Messrs. Eggers and Laversin possess all of these designations, CPA/ABV, ASA and CBA. At last count there were fewer than 100 valuation professionals in the United States that possess all of these credentials.

In addition to analytical skills, a testifying expert must exhibit oral and writing skills. A good expert witness is able to assist the judge and jury in understanding a complex issue and leading them to regard the valuation conclusion as well founded and sound. In our opinion, assisting the trier of fact is the primary responsibility of a respected testifying expert. We are not advocates for clients or positions. We are advocates of our opinion. A good expert witness is also able to withstand vigorous cross examination, which may involve a personal attack on the valuation expert, designed to impugn the integrity and credibility of the valuation expert, an attack on the methodologies and assumptions employed by the valuation professional. A good expert witness must be prepared to defend not only the employed methodologies and assumptions but also the conclusion.

A well written valuation report should lead the reader to the same conclusion as the preparer of the report. The same is true of oral testimony.

We live in a litigious society and many of the disputes involve closely held businesses. The financial issues are often contentious, complex and require valuation experts that are qualified and experienced litigation support professionals.
 
    Business Valuation Articles
  Mediation-Valuation Gives Parties Chance to Settle
 
  Good Business Intermediaries Can Attract the Right Investors
  Marketability Misconceptions
  More Marketability Misconceptions
 
  In re: Marriage of Hewitson
  Selecting a Business Appraisal Firm
  Forensic Accounting in Divorce Matters
  Standard of Value is Everything
  Why is the Date of Valuation Important?
  In re: Marriage of Duncan
  Why Do We Take a Minority Discount?
  What’s the Difference Between a Control Premium and a Minority Discount?
  What is “Fair Value” Anyway?
  Mart v. Severson
  ABCs of Appraiser Credentials
  “Core Earnings” Measure Alters Landscape
  What is USPAP?
  How Much Should a Business Appraisal Cost?
  What is Investment Value Anyway?
  Mediation-Valuation gives parties opportunity to “work-through” valuation to reach compromise
  What is Forensic Accounting?
  Current Lessons for U.S. Equity Investors
  Apportionment Methods - Pereira-VanCamp
  Highest and Best Use..
  Minority Shareholder Oppression – Fraud Investigation
  What's Real?
  Report Types and Level of Service
  Testimony and the Valuation Expert
  The Art of the Deal
  INC. Magazine article: What is your company worth NOW?
 
American Business Appraisers, LLP
3800 Blackhawk Road, Suite 140, Danville, California 94506
Phone: (925) 964-0370 • Fax: (925) 964-0374
E-mail American Business Appraisers, LLP
  © Copyright American Business Appraisers, LLP ® All Rights Reserved