Michael Jackson estate valuers give rare inside look

Experts for the estate of pop superstar Michael Jackson presented a fascinating look at how the valuations were done for the “tax trial of the century” in a BVR webinar. The case, Estate of Michael J. Jackson v. Commissioner, T.C. Memo 2021-48 (May 3, 2021), triggered intense media attention and was closely watched by valuation experts because of the contentious issues involved. In dispute was the value of three assets: Jackson’s name and likeness, his 50% interest in a music publishing company (operating business), and an entity that held a catalog of music.

The webinar panel consisted of Jay E. Fishman (Financial Research Associates) and celebrity licensing expert Mark Roesler (CMG Worldwide), who worked together on valuing the name and likeness. Also on the panel was music industry financial advisor David Dunn (Shot Tower Capital), who advised on the valuation of the publishing entity and the music catalog.

Widely divergent opinions: There was a huge difference between the valuations of the estate and the IRS—so great that, if the government prevailed, the estate would have to pay an extra $500 million in taxes. Why such a massive difference? As in most cases, divergent values are the result of different assumptions and inputs (some legitimate and some questionable), and the panel went into great detail about these matters, including the valuation approaches, projections, discount rates, discounts for lack of marketability and control, tax affecting, and more.

In the end, the court sided with the estate on the name and likeness value and the value of the music publishing company. The court sided with the IRS on the value of the music catalog. On the issue of tax affecting, although the Tax Court had ruled in the Estate of Jones (2019) that tax affecting was appropriate, it ruled that the facts and circumstances in this case did not support tax affecting.

A recording of the webinar, Power Panel: Estate of Michael J. Jackson v. Commissioner, is available if you click here (free to holders of BVR’s Training Passport and subscribers to BVR’s Desktop Learning Center). A case analysis as well as the court’s opinion are available at BVLaw.

Full results of DLOM survey now available

BVR’s survey on methodology and practice for estimating a discount for lack of marketability (DLOM) garnered over 200 responses. The full results are now available as a free download if you click here. BVR has been conducting this survey for over 10 years, the last one being done in 2018. The survey asks about specific methods and tools used, such as restricted stock studies, option price modeling, pre-IPO studies, and much more. Respondents were also asked to provide some open-ended comments and observations about the way they estimate DLOM. Thanks to everyone who participated!

2021 EBITDA multiples down slightly, per DealStats

Despite the vaccination rollout starting in the first quarter of 2021, EBITDA multiples ticked slightly lower, to 3.8x, according to BVR’s DealStats Value Index (DVI) report for 2Q 2021.

The path of the coronavirus outbreak negatively affected EBITDA multiples, which

sharply declined in the second quarter of 2020, to 3.7x, when the initial economic shutdowns were implemented, rose to 4.3x in the summer period when the coronavirus numbers improved, and fell yet again by the fourth quarter of 2020, to 3.9x, as cases spiked in the winter (see graph below). Because there has been relatively little movement over the past three quarters, a trend or clear direction has yet to emerge regarding the direction of EBITDA multiples in the near future as the questions remain, new variants of the coronavirus continue to emerge, and a new administration starts to implement its economic policies. DealStats will continue to monitor the trends in the EBITDA multiple.

Today! Take a free tour of Bizminer’s industry data

Galen Pugh of Bizminer will conduct a free 50-minute webinar today (August 4) of its industry and market research database that covers over 5,000 industry segments. Market areas range from the U.S. down to the ZIP code, and it offers a variety of customizable reports. Pugh will give an in-depth look at the functions and features of the database as well as insights into how BV professionals are using its reports. To register, click here (one CPE credit).

Damodaran to conduct valuation training through IMAA

Professor Aswath Damodaran (New York University Stern School of Business) will conduct a 12-hour training class in valuation hosted by the Institute for Mergers, Acquisitions and Alliances (IMAA). The training will consist of four daily sessions (three hours each) from September 14 to September 17 (it will be repeated November 8 to November 11). The objective of the training is to provide the fundamentals of each approach to valuation, together with limitations and caveats on the use of each, as well as extended examples of the application of each. For more information and to register, click here.

Global BV News

IVSC adds to Financial Instruments Board

The International Valuation Standards Council (IVSC) has announced that four new board members will join its Financial Instruments Board, the group responsible for drafting and consulting on International Valuation Standards (IVS) for financial instruments. The new board members are: Larry Levine, a managing director at Lincoln International LLC, based in Chicago; Marcus Morton, a managing director, valuation services, at Duff & Phelps, A Kroll Business, based in London; Manish Saxena, a partner in valuation advisory services at Grant Thornton, based in Bangalore; and Stephanie Sparvero, the global head of Bloomberg’s Evaluated Pricing Service (BVAL), based in New York. These individuals will take up their positions in August on an initial three-year term.