ASA conference hits the jackpot in Vegas
About 600 attendees converged—both on-site and virtually—for the American Society of Appraisers’ International Conference in Las Vegas October 24-26. It was great seeing many people at a live event after all these many months so there was a lot of catching up to do! Here are just a few items of interest—just the tip of the iceberg—from the sessions and the many networking opportunities (full coverage will be in the December issue of Business Valuation Update):
Johnnie White, the ASA’s CEO, has great things planned for the organization, including new headquarters, a new website, a systems overhaul, and a new PR campaign to raise awareness;
Activity on the Vegas Strip has bounced back in strong form—which was confirmed by a session Ray Moran (FON Valuation Services) moderated covering M&A and valuation issues in the gaming industry;
BV recruiter John Borrowman (Borrowman Baker) told us some alarming news: From May 2021 to October 2021, 63 professionals have left the business valuation, forensics, and litigation services profession;
Duff & Phelps would like some feedback on its development of a company-level beta module for its Cost of Capital Navigator;
A sports team’s current win-loss record doesn’t always have an impact on value, according to Drew Dorweiler (IJW & Co.);
The traditional relief from royalty method for valuing patents has serious shortcomings, one being that it doesn’t capture the value of a defensive patent portfolio, says Brian Dies (Hoffman Alvary & Co. LLC);
Closed-end fund data and expanded economic data are now available on the Tagnifi platform of guideline public-company data (it was a platinum sponsor of the conference); and
In their session, Ron Seigneur (Seigneur Gustafson LLP) and Nicholas Parseghian (Marcum LLP) said the pandemic has had some very positive effects on the cannabis industry—and much of it will stick going forward (Seigneur is a co-author of the Cannabis Industry Accounting and Appraisal Guide).
Kudos to the ASA and its conference staff for an amazing event! Next year’s conference will be in Fort Lauderdale, Fla. See you there!
Valuation experts spar over fraudulent transfer matter
In the bankruptcy court, two valuation experts squared off in a case where the trustee argued that a cash transfer by the debtor was a constructively fraudulent transfer under the bankruptcy code. The expert for the trustee was not able to show that the debtor was insolvent at the date of the transfer or became insolvent as a result of the transfer. The expert did not perform a balance sheet insolvency test but noted that, while total assets were about $20 million greater than liabilities, the bulk of the assets consisted of goodwill and was likely significantly overstated. The defendant’s expert did perform a balance sheet test and opined that the company was solvent at the date of the transaction. He valued the business as a going concern, which includes goodwill, and he offered credible evidence that the goodwill represented the results of a competitive market transaction.
The case is Yaquinto v. Thompson St. Capital Partners (In re Stone Panels, Inc.), 2021 Bankr. LEXIS 2635; 2021 WL 4436166 (Sept. 27, 2021). A case digest and full court opinion are available on the BVLaw platform.
Audax PE invests in Stout
Audax Private Equity has agreed to make an investment in Stout, a firm that provides advisory services in corporate finance, valuation, financial disputes, and investigations. The transaction is expected to close in the fourth quarter of 2021, according to an announcement. This is a continuation of the recent push by PE firms into accounting and valuation firms. Last month, Citizens Financial Group Inc. acquired Willamette Management Associates, a leading valuation consulting and forensic analysis firm.
Valuation experts are familiar with the Stout Restricted Stock Study and DLOM Calculator for quantifying a discount for lack of marketability (DLOM). In a recent BVR survey, nine out of 10 respondents say they use restricted stock studies for DLOM, with the Stout study being the front-runner (75% say they use the Stout study).
Damodaran on proposed billionaire tax
“A boon for appraisers and accountants,” but it is one of the worst tax proposals ever, says Aswath Damodaran (New York University Stern School of Business), in an appearance on CNBC. He’s referring to the Democratic proposal to tax the unrealized capital gains of people with either $1 billion or more in assets or three consecutive years of income of at least $100 million. Under current law, such assets are subject to tax only when they’re sold. The proposal meets all of Damodaran’s requirements for “really bad tax law,” namely that it targets very few people (and those who can fight back), it is tied to a volatile measure (capital gains), it is very difficult to compute (unrealized gains), and it may possibly cannibalize taxes already being collected from other sources. Plus, some billionaires would escape the tax if, say, the billion dollars they have does not grow—so it singles out successful entrepreneurs. “It’s almost perverse,” says Damodaran. There are better alternatives, he says, such as eliminating the free step-up in basis for inherited assets and raising rates.
Update on the pandemic’s impact on the gaming industry
While at the ASA International Conference in Las Vegas, we reached out to industry research provider Vertical IQ to give us an update on the impact of the pandemic on the gaming industry. They tell us that experts say that the increasing number of organizations requiring proof of vaccination to enter Nevada entertainment venues will put pressure on casinos to do the same. Experts say that Las Vegas Raiders games at Allegiant Stadium could provide a blueprint for how events will function. The team has contracted with tech company Clear for use of its Health Pass app to verify vaccination status. The team’s rule is succinct: no vaccination, no entry. Clear’s digital Health Pass requires the user to scan a state-issued ID or passport and upload pictures of his or her face and CDC vaccination card. The health pass, which is a QR code, expires after 12 to 24 hours. To access it again, the user provides a new photo that is matched to the original using facial recognition technology. The user must also answer a short health-screening questionnaire.
The Vertical IQ platform is geared to business valuation experts and provides details of industry trends, financial metrics, operations, risks, and financial challenges inherent in more than 500 industries. Learn more about the platform during a free webinar on November 18—click here to register.
Global BV News
Latest issue of OIV Journal available
The spring 2021 issue of the journal of the Organismo Italiano di Valutazione (OIV), the valuation standards-setter in Italy, contains the following articles:
· “Cross-Border DCF Valuation in a Nutshell” (Andreas Schueler);
· “Level 3 Reporting Quality: Trend Analysis of Derivative Instruments’ Restatements” (Joel M. DiCicco, Richard S. Gendler, Uliana Filatova, and Teodora Minkova); and
“Business Valuation and Fundamental Analysis” (Mauro Bini)
To download the journal, click here