When valuing a closely held, private company, it is important to recognize that the process may be more complex than valuing a publicly traded one. While valuation experts apply discounts at both the entity and shareholder levels, this blog will focus on exploring the various types of shareholder-level discounts and their impact on the valuation of closely held companies. Shareholder-level discounts are applied specifically to the value of an individual shareholder’s interest, accounting for the unique risks and limitations associated with owning a specific ownership interest. These discounts ..read more

When valuing any business, one of the most important factors to consider is the overall market environment. After all, market conditions have an enormous influence on a company’s performance and what buyers are willing to pay. Privately owned businesses have more protection from immediate market fluctuations than publicly traded companies. But over the longer term, market forces always make their way into financial statements and operational health. In a strong, growing economy, valuations tend to be more generous when demand is high and access to capital is easy. Buyers have more confidence t ..read more

When representing a client with a business valuation report in hand, attorneys must look beyond the numbers at face value. Though you often leave the financial modeling and technical details to the valuation experts, a keen understanding of valuation inputs remains imperative for attorneys on either side of a transaction or dispute.  The capitalization rate (a.k.a. the “cap rate”) is among the most impactful business valuation inputs. This factor warrants particular scrutiny, as variations of even 0.5 percent can alter the valuations significantly. Properly vetting this input is essential ..read more

NEW YORK, NY – January 22, 2024 -This month, MSG has added three members to its management team, all of whom will be working from its Rockefeller Center headquarters.   Renil Thomas James: Manager – Valuation Analyst Renil James is a Certified Financial Analyst chartered by the CFA Institute. Prior to joining MSG, he led valuation teams at Economic Partners and Deloitte Touche. He has vast expertise in the valuation of business enterprises, intellectual property, intangible assets, goodwill impairment testing, & stock options. Lindsey Griffin: Director of Marketing & Client Relati ..read more

As a business valuation expert, I am often called in to assess the true value of a business that is the target of an acquisition. In many such deals, there’s an intricate dance between financial reality and manipulated appearances, which may present a glossier, more appealing image of a company’s financial health than what reality might reveal. In a recently reported case between two private equity firms, the acquirer alleged the seller employed multiple accounting gimmicks to inflate the earnings of a software company, Mobileum, prior to its $915 million sale. By prematurely booking revenues ..read more

The admissibility of expert witness testimony serves as a cornerstone in modern legal proceedings, offering a lens through which complex, specialized knowledge can enlighten the trier of fact. As an expert witness for over 30 years, I have seen the standards for admissibility of expert testimony grow increasingly stringent over time. But who now bears the responsibility of ensuring an expert is fit to serve in that particular legal proceeding? The recent amendment to Rule 702 of the Federal Rules of Evidence, effective as of December 1, 2023, underscores a pivotal shift: elevating the burden o ..read more

“I know nothing about GAAP and I’ll leave it to my accountants.” said Donald Trump Jr. in court yesterday, testifying in the ongoing civil case against former president Donald Trump. GAAP, according to the Financial Accounting Standards Board (FASB), stands for “Generally Accepted Accounting Principles.” GAAP represents a common set of accounting principles, standards, and procedures used in the United States for financial reporting. GAAP encompasses a wide range of rules and guidelines related to accounting, financial reporting, and disclosure. These principles guide how companies prepare the ..read more

Occupational fraud continues to wreak havoc on businesses, with annual business losses reported to exceed $4.7 trillion worldwide. Fraud experts have long suggested that the presence of three conditions, known as the “fraud triangle,” greatly increases the likelihood that an organization will be defrauded. The classic fraud triangle, as conceived by criminologist Donald Cressey, consists of Pressure, Rationalization, and Opportunity. The Fraud Triangle, Cressey Pressure A perpetrator experiences some type of pressure that motivates fraud. Pressure can come from within the organization – for ex ..read more

As the baby boomer generation continues to reach retirement age, with 10,000 individuals turning 65 every day, the United States is facing a “silver tsunami” of business owners looking to exit their companies. This mass exodus of entrepreneurial talent has made succession planning an increasingly pressing issue, especially for closely-held businesses.   When advising clients on retirement and ownership transition, forensic accountants and business valuators provide invaluable expertise by highlighting crucial financial considerations that can profoundly impact the success of the process ..read more

Twitter, or “X”, taken private after Elon Musk’s $44 billion acquisition just over a year ago, is now valued at only $19 billion. A new internal memo is cited offering employees restricted stock units (RSUs) at a share price of $45. When private companies offer stock-like compensation options, the IRS advises them to use a 409A valuation – an independent assessment of how much a company is worth. These appraisals tend to be more conservative than valuations based on recent funding rounds or offers from potential acquirers, for example. X itself is “still negative cash flow,” Musk shared in Jul ..read more