Michael B. Lehner, CPA/ABV, CFE, ASA
September 23, 2018
shareholders’ agreement business valuation

Could a shareholders’ agreement come back to haunt (or help) you?

Shareholders’ agreements often include buyout provisions, governing transfers of stock if an owner leaves the business. These provisions may, for example, prescribe a fixed price, valuation discounts for lack of control or marketability, and procedures for valuing the business during a shareholder buyout. This article summarizes a divorce case where a Louisiana appellate court upheld a trial court decision to partition assets based solely on the fixed value prescribed in the shareholders’ agreement.
August 10, 2018
Business Valuation franchises

Valuing franchises

Not all franchises are created equal. This article highlights special considerations when valuing franchises, such as evaluating the risk vs. return, analyzing the franchise agreement and searching for factors that add to or detract from value.
July 27, 2018
Public company private businesses business valuation

Public vs. private companies: Understand the key differences

Public company data often is used to value private businesses. But there are important differences in how public and private entities operate. This article explains what’s different and how experts adjust their business valuation methodology to account for the differences.
July 20, 2018
business valuation professional buy-side due diligence.

Buyer beware: Hire a pro to help with M&A due diligence

The merger and acquisition (M&A) market is currently hot in many industries. But, before merging with another business, it’s important to do your homework. This article explains how a business valuation professional can help with buy-side due diligence. In addition to evaluating historical and prospective financial statements, an expert can help identify potential hidden liabilities and misrepresentations. A sidebar discusses the recent withdrawal of the proposed regulations on liquidation restrictions when valuing interests for gift and estate taxes.
July 12, 2018
market approach value business

Common pitfalls when applying the market approach in business valuation

The market approach is based on a straightforward premise: The value of a business can be derived from the prices others are paying for similar businesses. But, in practice, this valuation technique isn’t nearly so simple. This article identifies several common mistakes that experienced business valuation experts have learned to avoid when applying the market approach.
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).