Connelly case kicks off Heckerling conference

At the Heckerling Institute on Estate Planning in Orlando, Fla., earlier this month, the first session was a panel on key court cases of 2023, and “valuation was top of mind for many federal courts,” according to coverage in WealthManagement.com. Connelly v. United States was front and center—this is the case the U.S. Supreme Court will hear to resolve a circuit split. The question to be resolved is: How should corporate-owned life insurance (COLI) designed to fund the redemption of a deceased shareholder’s stock impact the fair market value of the subject company and the value of the decedent’s gross estate? A complete analysis of the valuation issues in the case by Roger Grabowski (Kroll) is in the January issue of Business Valuation Update.

The panel at Heckerling also discussed the Cecil case on tax affecting (a case that should be very familiar to valuation experts) and Schlapfer, a Tax Court case that was a “huge victory” for the taxpayer over the adequate disclosure issue.

Damodaran posts his second data update for 2024

Focusing on the equity markets in the U.S. and across the world, Professor Aswath Damodaran (New York University Stern School of Business) has posted his second data update of 2024. He notes that the “mood has shifted” in the past year and the 2024 outlook is “much sunnier, with the consensus shifting to a soft landing and inflation largely under control.” But he sees a “challenge for equity market investors” and concludes that stocks are “overvalued by about 9%, to start the year.” In his post he has links to two datasets:

• Historical Returns on Stocks, Bonds, Gold, and Real Estate (1928-2023); and
• Historical Implied Equity Risk Premiums and Expected Returns (1960-2023).

Also, he provides two spreadsheets:

• Implied ERP calculator—Jan. 1, 2024; and
• Valuation of the S&P 500 on Jan. 1, 2024.

You can read his post (and see his video) if you click here.

Court figures fair value of startup biotech for dissenters

In a dissenting shareholder case in a federal district court in Georgia, neither the Black-Scholes method nor the prior transactions method convinced a court of the value of a startup biotech company. The company, which never generated any revenue, notified shareholders of a sale of certain assets and a joint venture. The company offered shareholders 15 cents per share, but the dissenters asked for $1.25.

Unpersuaded: In court, the company’s valuation expert came up with 21.7 cents per share using a “novel application” of the Black-Scholes model. The dissenters’ expert estimated the fair value to be $1.19 per share based on two prior transactions of the stock. The court was not persuaded by either expert and came up with its own estimate of 56 cents per share based on what existing shareholders had paid in the past.

The case is Abeome Corp., Inc. v. Stevens, 2023 U.S. Dist. LEXIS 220302 (Dec. 11, 2023), and a case analysis and full opinion are available on the BVLaw platform.

2023 NACVA Porter Award recipient gives back in a big way

A few years ago at a conference, BVWire had the pleasure of chatting with J. Richard Claywell, a Houston practitioner who has been providing business valuation and forensic accounting services since 1985. He has a “few credentials,” namely the CPA, ABV, ASA, CBA, ICVS, CVA, MAFF, CFD, ABAR, CVGA, MBV, and ICVS-A. While we talked, we noticed a logo of a helicopter on his shirt, so we asked him about it. It was the logo of the Vietnam Dustoff Association. After being prompted, Claywell told us some incredible accounts of his time as a medic during the Vietnam War and flying in on helicopters to evacuate and treat wounded comrades while dodging enemy fire. He is on the board of the association, which organizes reunions and provides “a safe haven for emotional healing as may be necessary,” according to its website.

Claywell’s spirit of giving back applies to the valuation profession as well, which is one reason why he is the 2023 recipient of the Thomas R. Porter Lifetime Achievement Award. This award is given to a NACVA member who has demonstrated exemplary character, leadership, and professional achievements to NACVA and the industry. Always willing to help colleagues, Claywell has taught at various educational institutes and universities and has been published in several publications. Over the years, he has volunteered on boards and committees at NACVA, starting in its very early years. Michael Kaplan and Lari Masten talked with Claywell and presented him with the award, and you can watch the video if you click here.

Last call! Take a survey on data collection tools

Please take a two-minute survey about the use of portals to collect client data. We will publish the results in next week’s BVWire. To take the survey, click here. This survey—and others we’re planning—will augment BVR’s Business Valuation Firm Benchmarking Guide, which examines many practice management issues and allows firms to see what works for their peers. Our thanks to all of you who already participated!

One-on-one encounters make attending live conferences a unique experience

In today’s world, some people may automatically choose the “attend virtually” option when registering for a conference, or they may want to attend in person, but there’s not enough in the travel budget to allow for it. But attending in-person has unique benefits that can easily outweigh the cost.

Case in point: At the recent NACVA super conference in Fort Lauderdale, Fla., we were chatting with a young practitioner who was “ecstatic” over being able to talk shop with Dan Van Vleet (The Griffin Group), who co-presented a session on S corp valuations at the conference (with his colleague Bill McInerney). The Van Vleet model has prevailed in several recent cases about tax affecting S corps. They spent time together during one of the several networking opportunities over the two-day event. From the way the attendee talked, the chat the two had was the highlight of his conference experience—which cannot be replicated in a virtual environment.

Conference speakers are very generous with their time and advice, and they typically stay for the entire event, so there are many opportunities to interact. These events draw the very top thought leaders in the BV world, so it’s a rare chance to rub elbows with these esteemed professionals. Make it a resolution for the new year to attend at least one in-person event—you’ll be glad you did.

Global BV News

Webinar series explains IVS update

Next month, the International Valuation Standards Council (IVSC) will host a series of webinars exploring the latest and most significant updates to the International Valuation Standards (IVS), which are set to be released at the end of this month. During these webinars, you can interact directly with IVSC’s technical staff and standards board representatives. The first webinar will be on February 5, and you can register if you click here.