Income Statement Adjustments: Necessary to Obtain Value at Appropriate Levels (Video and Text)

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What adjustments are necessary to appropriately value a company? We normalize for non-recurring and unusual items and for discretionary expenses of owners. These are necessary to achieve marketable minority/financial control value. Then, if strategic control is desired, we adjust cash flows for synergistic or strategic cash flow benefits. It is important to understand the critical differences between normalizing and control adjustments.

The Parties Selected the Single Appraiser to Determine Value for Their Buy-Sell Agreement Long Before the Trigger Event

The Genesis of My Recommendation for Single Appraiser Valuation Processes

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I have been advocating single appraiser valuation processes for buy-sell agreements for many years. This video relates the story of the genesis of the idea that has led me to write four books on buy-sell agreements and to participate in buy-sell agreement processes all around the nation.

The Three Key Components of Business Value

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At the core of every business valuation, whether of an entire business or an interest in a business, lie three key elements that must be examined and understood. This is true regardless of the seeming complexity or simplicity of any valuation situation. The elements are expectations for cash flow, the expected growth in cash flow, and the risks associated with achieving the cash flow. In this short video post, we Keep It Simple, Sally or Stewart and will elaborate on the concepts in the near future.

Urgent Warning (and Solution) to Attorneys and Business Owners re Shareholder/Buy-Sell Agreement Problems

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WARNING. Portions of the great majority of buy-sell agreements (or relevant portions of operating agreements) addressing the valuation of interests when trigger events occur are seriously flawed. As a result, they are destined to create time-consuming, expensive, and emotional disputes between buyers and sellers when they are triggered. Most attorneys and business owners do not seem to believe me, but recent experience only reinforces the need for this warning post.

One Picture Wins the Day in the Complex AriZona Iced Tea Litigation

Keep it Simple and Hit the Bull's Eye

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While I have always focused on trying to make presentations for judges as understandable as possible, I have been thinking about this topic a good bit during the past year. By the time the year is over, I will have spoken on this topic of simplifying complex financial information for judges and juries a number of times around the country. Sometimes, it is a single graphic that helps convey the reasonableness of a complex series of opinions. This post is about one such graphic.

Kress v. U.S. Denies S Corporation Premium and Accepts Tax-Affecting

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The issue of a premium for an S corporation at the enterprise level has been tried in a tax case, and the conclusion is none. This case marks a virtually complete valuation victory for the taxpayer. It also marks a threshold in the exhausting controversy over tax-affecting tax pass-through entities and applying artificial S corporation premiums when appraising S corporations (or other pass-through entities). This post provides an extensive review of the case.

Seven Ideas to Convey Business Valuation Concepts to Judges and Others

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How should an expert explain the basics of valuation to a judge or a jury or a business owner or an attorney who needs to understand something about value for court, for personal reasons, or for clients? This post provides seven ideas to discuss the essence of business valuation in terms that have proven successful for me.

10,000 Steps (and a Bit of Pickleball) Once Again!

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I last wrote about walking and my personal goal to walk a minimum of 10,000 steps each day. In that post, I reported that I had walked 10,000 or more steps every day in November and did the same thing in December, up to and including New Year’s Eve. After a major setback, I am happy to announce I crossed the 10,000 step daily goal for the first time since December 31st.

Should Pre-Litigation Appraisals be Admitted in Current Litigations?

It is Likely Best to Assume That They Will be Admitted

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Peter Mahler of New York Business Divorce Blog wrote a post today titled “Disclosure of Estate Tax Stock Appraisals in Shareholder Disputes.” The question addressed is if or whether, in the context of contested stock valuation procedures stemming from elections to purchase in statutory dissolution or dissenting shareholder cases, pre-litigation appraisals rendered for estate tax purposes (or other purposes) should be discoverable. That’s a good question. In this post, I’ll comment briefly as a business appraiser and businessman.

11 Good Things About EBITDA

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The last post addressed EBITDA’s “Naughty 11” Problems and What to Do About Them. Today we talk about EBITDA’s “11 goodies” that help counter the “naughty 11” problems and make it a useful tool for analysts, operators, and owners. In the end, there is no single magic measure of cash flow that reveals all about business value. EBITDA, however, is one measure of cash flow that deserves attention in terms of valuation-related analysis, but in the context of solid reviews of historical income statements, balance sheets, and cash flow statements with insights about history and outlook from management.