Michael B. Lehner, CPA/ABV, CFE, ASA
October 2, 2017
hidden assets unreported income

Finding hidden assets and unreported income

Valuation experts are not responsible for finding fraud unless a client specifically hires them to conduct a forensic investigation. But the business valuation and forensic accounting disciplines often intersect. This article explains the warning signs that controlling shareholders are hiding assets or downplaying cash flow to minimize buyouts of their spouses or minority shareholders and why it’s important to hire a financial expert from the get-go. A sidebar discusses unintentional financial statement omissions — and how they may be unearthed.
September 25, 2017
valuation selling business

4 ways to add value before selling a business

Business owners typically want to maximize the selling price when it’s time to cash out — and buyers may be willing to pay top dollar if the company is positioned for future growth. This article discusses how valuation experts can help owners understand their strengths and weaknesses, allowing them to boost bargaining strength with potential buyers over the long run.
September 17, 2017
market approach iBusiness Valuation

Using the Market Approach in Business Valuation

There are three general ways to value a business: the cost, income and market approaches. This article focuses on the market approach, comparing and contrasting two methods that fall under it: the M&A method and the guideline public company method. Both have intuitive appeal, as well as various downsides, so they’re not applicable in every valuation assignment.
September 10, 2017
reasonable owner compensation business valuation

5 factors to help determine reasonable compensation in business valuation

The question of reasonable compensation is frequently debated in shareholder disputes, divorces and IRS inquiries. Owners’ compensation can vary significantly from company to company based on many factors, such as the owner’s education, licenses, training and salary history; the business’s size; and industry trends. This article explains five factors courts use to determine whether an owner-employee’s compensation is reasonable. Typically, a determination of reasonable compensation is objective, unbiased and based on relevant empirical data.
August 13, 2017
Business valuation experts business growth strategies

Business valuation experts can play a supporting role in business growth strategies

Business valuation experts can play many roles in facilitating a company’s success, including providing support to management in evaluating strategic investment decisions. This article discusses several ways companies can grow and the methods valuators use to analyze business projections and other financial data integral to determining successful growth strategies.
July 31, 2017
Business valuation experts noncompete agreements

Assessing the value of a noncompete

Noncompete agreements are used to smooth management transitions after a business sale. They are contractual agreements that restrict sellers from competing in the same industry for a given time period within a specific geographic area. This brief article explains how business valuation experts determine the value of noncompete agreements in mergers and acquisitions.
July 13, 2017
business valuation buy-sell agreements

Beware of business valuation provisions in buy-sell agreements

A recent Delaware case demonstrates how courts give substantial weight to business valuation provisions in owners’ agreements, especially when the experts maintain their independence and follow the terms of these agreements. This article explains the importance of drafting agreements between owners that cover all the value-related bases.
June 24, 2017
business valuation experts industry

How does industry risk impact business valuation?

There’s a trade-off between risk and return in business valuation. Investors expect to receive a higher return as the company exposes them to greater risk. Industry-specific risk is an important consideration when estimating an investor’s expected return. This article explains how business valuation experts measure industry risks and factor them into their analyses. A sidebar highlights the importance of defining the subject industry correctly.
June 17, 2017
DCF business valuation

DCF business valuation method is only as good as what lies beneath

This article uses a 2012 case, In re Bachrach Clothing, to illustrate that the discounted cash flow (DCF) method is only as reliable as its underlying assumptions — and the objectivity of the experts performing the analyses. The article describes the background of this case and looks at the discrepancies between the two experts’ approaches. The experts both relied on the same cash flow projections and used the DCF method — but reached radically different conclusions. The article notes the importance of supporting valuation assumptions with objective, market-derived evidence to reach a well-reasoned valuation conclusion that can withstand court scrutiny.
June 11, 2017
business valuation fraud

Business valuation professionals factor fraud into the valuation equation

When fraud strikes, it can have a major impact on a company’s value. An important part of the business valuation process is identifying potential fraud risks and gauging whether management has taken appropriate action to mitigate those risks. This article explains how valuation professionals conduct a fraud risk assessment that’s customized based on the subject company’s size and industry, as well as what to do when fraud risks materialize.