Michael B. Lehner, CPA/ABV, CFE, ASA
July 6, 2018
points investigate hiring business valuation expert.

Help your business valuation expert help you

Asking the right questions and obtaining clarification up front can help business owners, attorneys and other interested parties get the most from a business valuation expert’s expertise and avoid costly mistakes. This article suggests several points to investigate when engaging a business valuation expert, including their credentials and professional experience as well as their ability to explain the appropriate standard of value and the valuation’s purpose. The article states that the more clients understand about the valuation process, the better able they will be to ask the right questions.
June 25, 2018
adjustments business valuation expert value a business.

3 ways business valuation experts adjust financial statements

Business valuation experts can’t always accept the subject company’s financial statements at face value. Sometimes adjustments are needed before an expert can use the financial statements to value a business. This article provides three common types of adjustments and explains when each one might be relevant.
June 17, 2018
GAAP rule changes could have a major impact on business valuation.

How will new accounting rules affect the business valuation process?

Under U.S. Generally Accepted Accounting Principles (GAAP), two new accounting rules on revenue recognition and leases will soon go into effect for public companies. (Private companies get an extra year’s reprieve.) This article explains that these changes could have a major impact on how business valuation professionals evaluate financial statements, apply pricing multiples and estimate a company’s cost of capital.
June 10, 2018
Business valuation shareholder loans debt obligations equity transaction

Classifying shareholder “loans” in a Business Valuation

Business valuation professionals must decide whether shareholder loans are bona fide debt obligations, a type of equity transaction or a hybrid of the two. Debt vs. equity classification has relevance when valuing a business, as well as in divorce cases. This article explains why the distinction matters and what factors the IRS considers when deciding what qualifies as a bona fide loan. In re Appraisal of PetSmart, Inc., Delaware Ch., C.A. No. 10782-VCS, May 26, 2017
June 2, 2018
how tax reform will specifically affect the subject company’s cash flow

3 questions to ask about tax reform when valuing a business

The Tax Cuts and Jobs Act (TCJA) is the biggest change to the tax law in over 30 years. This article explains why it’s important to consider 1) how tax reform will specifically affect the subject company’s cash flow, 2) how management plans to use any tax savings, and 3) whether management’s projections seem reasonable. A sidebar explains how the new law could also affect a company’s tax base (the amount to which new, lower tax rates will be applied).
April 23, 2018
new tax law divorce settlements Business Valuation Alimony

How the new tax law affects divorce settlements & Business Valuation

Business valuation experts often help formulate settlement offers in divorce cases. This article highlights provisions of the Tax Cuts and Jobs Act (TCJA) that could affect divorce settlements, including elimination of the deduction for alimony payments, restricted deductions for state and local taxes, expanded uses of Section 529 education plans and reductions in business tax rates. A sidebar defines alimony under the tax rules that will apply through 2018.
April 1, 2018
Discounted cash flow vs. capitalization of earnings business value

Discounted cash flow vs. capitalization of earnings

Future earnings drive business value under the income approach. This article compares and contrasts two methods that fall under this approach: the discounted cash flow and capitalization of earnings methods. A sidebar explains what terminal value is — and how to calculate it.
March 18, 2018
price paid transaction “fair value”?

Deal price doesn’t always represent fair value

In appraisal rights claims, the price paid in a merger may not represent “fair value,” especially when the deal involves related parties. This article summarizes a recent Delaware Chancery Court case, where the judge concluded that a deal price is only as reliable as the process that was used to negotiate the transaction. In the absence of a “competitive and fair auction,” the court will rely on other business valuation methods instead. John Douglas Dunmire v. Farmers & Merchants Bancorp of Western Pennsylvania, Inc., 2016 Del. Ch., C.A. No. 10589-CB, Nov. 10, 2016
March 3, 2018
business valuations expected cash flow

Relying on management’s estimates of expected cash flow

Often, business valuations are based on estimates of expected cash flow, but it’s important to evaluate whether these estimates seem reasonable. This article explains the role that cash flow estimates play in valuing a business and the difference between forecasts and projections.
February 22, 2018
joint business valuation experts

Should you consider hiring a joint business valuation expert?

The use of a joint business valuation expert can often save resources — if the parties will openly share information and trust each other. This article outlines the benefits of using a joint expert. But it acknowledges that joint experts might not be realistic in all situations, including contentious divorces and shareholder disputes.