Financial valuation applications and models, 4th edition

Financial
Valuation


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Financial
Valuation
Applications and Models
Fourth Edition
with Website

James R. Hitchner


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Library of Congress Cataloging-in-Publication Data:
Names: Hitchner, James R., author.
Title: Financial valuation: applications and models, + website / James R.
 Hitchner.
Description: Fourth Edition. | Hoboken: Wiley, 2017. | Series: Wiley finance
  | Revised edition of the author’s Financial valuation, c2011. | Includes
 index.
Identifiers: LCCN 2016053398| ISBN 978-1-119-28660-8 (hardback) | ISBN
  978-1-119-31231-4 (epub) | ISBN 978-1-119-31233-8 (epdf) | ISBN 978-1-119-36281-4 (obook)
Subjects: LCSH: Corporations—Valuation.
Classification: LCC HG4028.V3 H583 2017 | DDC 658.15—dc22 LC record available at
/>Printed in the United States of America
10 9 8 7 6 5 4 3 2 1

To my son, Jason Earle Hitchner.


Contents

About the Editor 

xxi

About the Authors

xxiii

Acknowledgmentsxxxvii
Prefacexvii
Chapter 1
Introduction to Financial Valuation

1

Who Values Businesses?
1
Purpose of a Valuation
2
Professional Valuation Organizations
3
Standards of Value
3
Premise of Value
6

Principles of Appraisal Practice
7
Dates8
Approaches to Value
8
Valuation Procedures
9
Summary9
Addendum 1—Valuation Checklist/Ready Reference
(Revenue Ruling 59-60)
10
Addendum 2—International Glossary of Business
Valuation Terms
18
Addendum 3—AICPA Glossary of Additional Terms, Statements
on Standards for Valuation Services VS Section 100
26

Chapter 2
Standards of Value

Introduction
How the Standard of Value Can Affect the Final “Number”
Premises of Value
Common Standards of Value
Common Operational Premises Underlying the Standard of Value
Application of Specific Standards of Value
Fair Value in Shareholder Dissent and Oppression
Control Premiums
Immediately Before

Unless Exclusion Would Be Inequitable
Extraordinary Circumstances
Current and Customary Techniques

29

29
31
32
33
39
40
44
46
46
47
48
48

vii


viii

Contents

Standard of Value in Divorce
50
Fair Value in Financial Accounting
55

Measurement56
Conclusion57

Chapter 3
Research and Its Presentation

59

Obtaining Internal Information
59
External Sources of Data
60
Research Techniques and Planning the Search
61
Information Sources: Business Financial Databases
65
Economic Research
66
Selected Sources of Economic Information
67
Industry Research
68
Selected Sources of Industry Information
68
Guideline Public Company and Guideline Company
Transactions Research
70
Sources for Guideline Public Company Data
70
Guideline Company Transactions Databases

71
Presenting Research in a Report
72
Cost of Capital Research
72
Other Sources of Information
74
Summary75

Chapter 4
Financial Statement and Company Risk Analysis 

Historical Financial Statement Analysis
Length of Financial History to be Used
Spreading Financial Statements in Columnar Format
Adjustments to Financial Statements
Normalization of Historical Financial Statements
Unusual, Nonrecurring, and Extraordinary Items
Nonoperating Items
Changes in Accounting Principle
Nonconformance with GAAP
Tax-Affecting the Earnings of Subchapter S Corporations and
Other Adjustments
Degree of Ownership Interest
Normalization Adjustments
Common Sizing Normalized Financial Statements
Ratio Analysis (Quantitative Analysis)
Comparative Analysis
Risk Analysis (Qualitative Analysis)
Macroenvironmental Analysis

Addendum 1—Commonly Used Financial Ratios:
Application to Ale’s Distributing

Chapter 5
Income Approach 

Fundamental Theory
Basics of Income Approach—“A Fraction”

77

77
78
78
81
81
82
83
84
84
85
86
86
90
97
98
102
108
109

117

117
118


Contents

ix

Income Approach Methodologies
119
Normalization Process
120
Adjustments for Ownership Characteristics
120
Adjustments for GAAP Departures and Extraordinary,
Nonrecurring, and/or Unusual Items
123
Adjustments for Nonoperating Assets and Liabilities
and Related Income and Expenses
124
Adjustments for Taxes
125
Adjustments for Synergies from Mergers and Acquisitions
126
Determination of Future Benefit Stream (Cash Flows)
127
Defining the Benefit Stream
127

Defining Net Cash Flow
127
Use of Historical Information
129
The Capitalized Cash Flow Method
135
The Discounted Cash Flow Method
138
Terminal Value
145
Capitalized Cash Flow Method (Revisited)
151
Excess Cash Flow Method
153
Best Practices
162
Conclusion163
Addendum 1—Application of the Direct Equity Method (DEM)
and the Invested Capital Method (ICM)
164
Addendum 2—Dealing with Debt
171
Addendum 3—Best Practices: The Terminal Year of a
Discounted Cash Flow Model
177

Chapter 6
Cost of Capital/Rates of Return

185

Value Drivers
185
Relationship between Risk and Return
187
Characteristics of Cost of Capital
190
Weighted Average Cost of Capital
190
The Cost of Debt
192
The Cost of Equity
193
Risk-Free Rate (Rf)197
Equity Risk Premium (RPm or ERP)
200
Beta206
Industry Risk Premium
214
Size Premium (RPs)217
Company-Specific Risk
222
Issues in Cost of Capital Application
231
Cost of Equity Case Study
232
Implied Returns from Market Data
232
Emerging Equity Models
241

Legacy Valuations: Using Ibbotson Data
244
Venture Capital Returns
245
250
Addendum 1—SPARC: Strategy/People/Architecture/Routines/Culture
Addendum 2—Twenty Ways to Calculate the Cost of Equity Capital:
A Case Study
261


x

Contents

Chapter 7
International Cost of Capital 

271

Chapter 8
Market Approach

291

Chapter 9
Asset Approach 

343

Background271
Estimating the Cost of Equity
274
Developing the WACC (Appreciating the Differences between
Debt and Equity)
278
Analysis of Multinational Corporations
280
Due Diligence: Company-Country-Currency-Sector Framework
282
Case Study
286
Technique for Considering a Large Portfolio of Countries
288
Conclusion289

Overview291
Level of Value
295
Advantages and Disadvantages of the Market Approach
296
Understanding the Subject Company
298
Finding Guideline Companies
298
Sources of Transaction Data
300
The Direct Market Data Method
303
Guideline Company Transactions Method

304
Selecting Guideline Public Companies
306
Basic Financial Indicators
312
Comparing Guideline and Subject Data
313
Adjustments to the Guideline and Subject Companies
316
Concluding Remarks on Choosing Guideline Companies
323
Calculating Standard Pricing Multiples
323
Equity versus Invested Capital
324
Financial Statement Measures
325
Computing Multiples
328
Matching Price to Parameter
328
Dispersion of Pricing Multiples
329
Applying the Valuation Multiples
331
Adjusting Pricing Multiples for Differences in Growth
333
Adjusting the Guideline Multiples for Size
337
Summary341

Theory343
Application344
Premise of Value
346
Control versus Minority
346
Built-In Gains Taxes
347
General Steps in the Asset Approach
352
Case Study
353
Best Practices
363
Addendum 1—Understanding Real Estate Appraisals
364
Addendum 2—Understanding Machinery and Equipment Appraisals
375


Contents

xi

Chapter 10
Valuation Discounts and Premiums 

391

Chapter 11
Report Writing 

495

Levels of Value
392
Liquidity versus Marketability
395
Entity-Level versus Shareholder-Level Discounts
396
Controversial Issues
398
Discounts for Lack of Control
398
Levels of Noncontrolling Interests
401
Control Premiums
404
Alternative View on Premium for Control
408
Conclusion409
Control and the Market Approach
410
Discounts for Lack of Marketability
411
DLOM on a Controlling Interest
412
Tax Court Cases
420

Empirical Evidence of Marketability Discounts
422
Applying Study Data
466
Quantitative Tools
468
Factors Influencing Marketability
481
Other Discounts
485
Premiums Accorded Voting versus Nonvoting Stock
491
Summary493

Valuation Engagements
495
USPAP Engagements
496
Types of Valuation Engagements and Related Reports
496
Detailed Valuation Report
497
Analysis of Risk
502
Other Business Valuation Reports
505
Addendum—Sample Valuation Report
507
History and Nature of Business
513

General Economic and Industry Outlook
516
Book Value and Financial Position
523
Projections532
Approaches to Value
532
Income Approach
534
Cost of Capital
545
Market Approach
554
Guideline Public Company Method
554
Guideline Company Transactions Method
572
Reconciliation of Valuation Methods
575
Conclusion of Value
576
Appendix A—Assumptions and Limiting Conditions
576
Appendix B—Valuation Representation/Certification
580
Appendix C—Professional Qualifications of the Appraiser
581
Appendix D—Other Sources Consulted
582
Appendix E—Exhibits

582


xii

Contents

Chapter 12
Business Valuation Standards

583

Chapter 13
Valuation of Pass-Through Entities

607

History of Valuation Standards
583
Government Action
584
Organization of the USPAP Standards
585
USPAP Business Valuation Standards (2016–2017)
586
Other Business Valuation Standards and Credentials
593
Summary597
Addendum 1—Standards: A Summary of the AICPA’S BV Standards
598

Introduction
607
Background608
Standard of Value
620
Controlling Interests in Pass-Through Entities
622
Applicable Tax Rates
635
Noncontrolling Interests in Pass-Through Entities
639
Treharne Model
640
Van Vleet Model
646
The S Corporation Economic Adjustment
648
The S Corporation Equity Adjustment Multiple
651
Mercer Model
655
Grabowski Model
664
Summary: Noncontrolling Interest in Pass-Through Entity Theory
674
Bibliography677

Chapter 14
Estate, Gift, and Income Tax Valuations

Valuations in Estate and Gift Taxes
Selected Internal Revenue Code Provisions
Selected Treasury Regulations
Selected Revenue Rulings
Valuations for Income Taxes

Chapter 15
Valuation of Family Limited Partnerships 

Family Limited Partnership Uses
Tax Advantages
How Family Limited Partnerships Are Formed
Other Characteristics of Family Limited Partnerships
State Law, Property Rights, and Their Importance to the
Valuation Process
Improper Formation can Create Problems for Partners
Valuation of Family Limited Partnership Interests
Preliminary Considerations
Valuation Process
Illustrative Case Study
Court Cases

681

681
682
683
686
716

725

726
727
727
728
729
731
732
733
750
762
769


Contents

Chapter 16
Summary of Tax Court Case Valuation Issues
Tax Court Opinions

xiii

779

779

Chapter 17
Shareholder Disputes 

783

Chapter 18
Employee Stock Ownership Plans 

801

History of Shareholder Disputes
783
Causes of Action
784
Standard of Value
786
Valuation Date
789
Entire Fairness
790
Valuation Methodology
791
Valuation Adjustments
793
Some Relevant Court Cases
796
Court Case Caveats
799
Conclusion800

Introduction801
Purposes801

Requirements802
Tax Considerations
802
Need for Valuation Services
804
Adequate Consideration and Standard of Value
805
Feasibility of Formation
807
ESOP Share Ownership Characteristics
811
Ongoing Operations
812
Accounting Standards for ESOP Companies with Acquisition Debt
816
ESOP Valuation Engagements
818
Regulatory Environment
825
Demand for Review Appraisal Services
826
Additional Information
826

Chapter 19
Valuation in the Divorce Setting

Standards of Value
Premise of Value
Goodwill—The Battleground for Divorce Valuations

Defining Goodwill
State Interpretations on Inclusion of Goodwill in the
Marital Estate
Personal versus Entity (Enterprise) Goodwill
Allocation of Goodwill as Personal or Entity
Applying the Factors to Separate Goodwill
Role of Noncompete Agreements in Determining Personal versus
Entity Goodwill
Trifurcation of Goodwill and the Concept of Tradeable
Personal Goodwill

831

831
833
834
834
835
836
837
838
842
843


xiv

Contents

Personal Goodwill in Commercial Businesses

844
Double Dipping in Divorce Cases
845
Valuation of the S Corporation and Other Pass-Through Entities
846
Restrictions on Data
847
Range versus Specificity
847
Professional Standards
847
Valuation Methodology and the Application of Discounts
849
Liquidity Myth in Pass-Through Entities
852
Divorce Valuation and Bankruptcy
852
Summary852

Chapter 20
Valuation Issues in Small Businesses

853

Chapter 21
Valuation Issues in Professional Practices 

867

Chapter 22

Reasonable Compensation 

889

Chapter 23
The Valuator as Expert Witness

911

Common Characteristics
853
Financial Statement Adjustments
856
Qualitative Factors Affecting Value
859
Valuation Methods
860
Reasonableness Tests
865
Summary866

Types of Practices
868
Purpose of Valuation
871
Professional Goodwill and Practice Goodwill
871
Select Case Law for Marital Dissolution
873
Factors Affecting Value

875
Financial Statement Adjustments
879
Valuation Methods
883
Summary887

Purposes for Analysis
890
Types of Compensation
893
Assessing Compensation
896
Methods of Calculating Reasonable Compensation
900
Divorce and the “Double Dip”
904
Personal Goodwill
906
Reasonable Compensation Job Aid for IRS Valuation Professionals
907
Conclusion910

Introduction911
Pre-Engagement Considerations
913
United States Requirements and Procedures Applicable to
Expert Witnesses
914
Daubert Motion

916
The Ikarian Reefer
919


Contents

xv

Canadian Requirements Applicable to Expert Witnesses
920
“Rules” for the Testifying Expert When on the Witness Stand
922
Conclusion929

Chapter 24
Fair Value Measurement and the Valuation of Intangible Assets 

931

Introduction931
Nature of Intangible Assets
932
Reasons to Value Intangibles
934
Fair Value Measurement
934
Business Combinations
939
Intangibles: Risk and Return

944
Valuation Approaches to Intangibles
945
Cost Approach
946
Market Approach
949
Income Approach
952
Amortization Benefit
957
In-Process Research and Development
959
Goodwill960
Financial Reporting Disclosures
967
Statements on Standards for Valuation Services VS Section 100
968
Case Study: Determining the Value of Goodwill and Other
Intangible Assets in a Business Combination
970

Chapter 25
Marketing, Managing, and Making Money in a Valuation Services Group
Purpose and Overview

Chapter 26
Business Damages 

1007

1007

1009

General Considerations in Damages Calculations
1009
Legal Principles Governing Damages
1010
Measurement of Damages
1016
Can Lost Profits Exceed the Fair Market Value of the Business?
1028
Considerations in Intellectual Property Damages
1029
Considerations in Securities Class Action Litigation
1036
Conclusion1040

Chapter 27
Other Valuation Service Areas 

A: Valuation for Public Companies and/or Financial Reporting
B: Valuation Issues in Buy-Sell Agreements
C: Valuing Debt
D: Valuation Issues in Preferred Stock
E: Restricted Stock Valuation
F: Valuation of Early-Stage Technology Companies
G: Valuation Issues Related to Stock Options and Other
Share-Based Compensation

H: Real Option Valuations
I: Maximizing Shareholder Value

1043

1043
1043
1044
1044
1044
1044
1044
1045
1045


xvi

Contents

Chapter 28
Valuation of Healthcare Service Businesses

1047

Chapter 29
Determination of Compensation in the Healthcare Industry

1089

Chapter 30
Special Industry Valuations

1099

Chapter 31
Valuation Views and Controversial Issues: An Illustration 

1179

About the Website

1225

Background1051
Industry Factors
1054
Standard of Value
1066
Considerations for Valuing Healthcare Entities
1067
Valuation Process
1068
Control Premiums and Minority Discounts
1074
Discounts for Lack of Marketability
1075
Valuation Issues for Specific Healthcare Industry Niches
1076
Public and Private Healthcare Services Companies by Niche

1087

Background on Drivers of Compensation Assignments
1089
Regulatory Guidance
1090
Applicable Valuation Standards
1092
Compensation Elements
1092
Sources of Data
1096
Documentation1097
Conclusion1097

Construction1099
Oil and Gas Exploration and Production Valuations
1111
Radio1124
Cable TV
1132
Restaurants1144
Bars and Nightclubs
1162
Addendum 1—An Interview with a Business Broker-Valuator
1168

The Report
1179
Introduction1182

Regional Economic Data (as of September 1, 20X5) 
1189
Local Economy
1189
Industry Outlook 
1190
Financial Analysis of the Company
1192
Appraisal of Fair Market Value
1200
Reconciliation of Valuation Methods
1223

Index1229


Preface

I

t’s hard to believe that almost 14 years have passed since we published the first edition of Financial Valuation: Applications and Models (FVAM). When I started this
book, it was my intention to design it to accomplish two main goals. The first and
most obvious one was to gather a group of respected valuation practitioners from
all over the country and from the various valuation and appraisal associations to
coauthor a text on valuation and to have a consensus view and presentation. Given
the strong personalities of the authors, this was no easy task. As one of my coauthors
said to me in the beginning, “Jim, what you are doing is equivalent to trying to herd
cats.” Well, he was right. However, I believe we met this goal in all three editions,
and I credit my coauthors in their willingness to be open-minded and to change their
opinions when a better way was presented.

My second goal was to use this text and the companion Financial Valuation
Workbook for business valuation education. Both texts are the foundation for
the American Institute of Certified Public Accountants (AICPA) five-day National
Business Valuation School, which is offered around the country, and the National
Association of Certified Valuation Analysts (NACVA) three-day Advanced Valuation: Applications and Models course, also offered around the country. I want to
thank all the instructors and staff of both organizations. What a wonderful group of
people to work and consult with.
FVAM is an all-encompassing valuation text that presents the application of
financial valuation theory in an easily understood manner. Although valuation theory
is thoroughly discussed, the focus is on applications, models, and methods. FVAM
contains numerous examples and methods that will assist the reader in navigating
a valuation project, along with hundreds of short, easily understandable “ValTips.”
These ValTips alert the reader to important and often controversial issues.
We have assembled 30 highly visible and well-respected valuation professionals
to discuss and agree upon the proper methods of valuation and to collectively present
the group’s views and positions on business valuation concepts and, most important,
applications. Each author is the coauthor of the entire book. The authors come from
all over the United States and Canada and are members of many professional valuation and financial associations, including the American Institute of Certified Public
Accountants (AICPA), the American Society of Appraisers (ASA), the CFA Institute,
the Institute of Business Appraisers (IBA), and the National Association of Certified
Valuators and Analysts (NACVA). Many hold multiple designations or certifications:
20 Accredited in Business Valuation (ABV) with the AICPA
18 Accredited Senior Appraisers (ASA) with the ASA
■■ 2 Certified Business Appraisers (CBA) with the IBA
■■ 4 Chartered Financial Analysts (CFA) with the CFA Institute
■■
■■

xvii

xviii

Preface

3 Certified Fraud Examiners (CFE) with the ACFE
15 Certified in Financial Forensics (CFF) with the AICPA
■■ 21 Certified Public Accountants (CPA)
■■ 10 Certified Valuation Analysts (CVA) with the NACVA
■■ 4 Chartered Global Management Accountants (CGMA)
■■ 1 Canadian Institute of Chartered Business Valuators (CICBV)

■■

■■

Collectively, they have several hundred years of valuation and related financial
experience. This text is the first time such a large group of diverse valuation practitioners
has been assembled to agree on the application of valuation principles and methods.
There is no other text like this. Given the often judgmental nature of valuation and the
strong opinions that seem to go with being a valuation analyst, this was no easy task.
We hope we continue to advance the profession by providing our agreed-upon views.
We invite other practitioners to comment on this edition and/or assist in future editions
of this book. We will never gain consensus in everything in the valuation profession;
however, we do hope to shorten the long list of controversies and disagreements. This
text represents the state-of-the-art in the business valuation profession as it evolves.
This book includes basic, intermediate, and advanced topics, including:
Cost of capital
Discounts and premiums
■■ Shareholder disputes

■■ Mergers and acquisitions
■■ S corporations
■■ Advanced company risk analysis
■■ Income, estate, and gift taxes
■■ Marital dissolution
■■ Employee stock ownership plans (ESOPs)
■■ Financial reporting
■■ Family limited partnerships
■■ Healthcare and other industries
■■ Intellectual property
■■ Commercial damages
■■ High-tech issues
■■ Reasonable compensation
■■
■■

FVAM is targeted to the following professionals and groups, who are typically
exposed to financial valuation issues:
Appraisal associations and societies
Appraisers
■■ Actuaries
■■ Attorneys
■■ Bankers
■■ Business brokers
■■ Business executives, including CEOs, CFOs, and tax directors
■■ Business owners
■■ CPAs
■■ Estate and gift planners
■■ Financial analysts
■■ Government agencies, including the IRS, SEC, DOL, OIG, and DOJ

■■
■■


Preface

xix

Insurance agents
Investment advisors
■■ Investment bankers
■■ Judges
■■ Pension administrators
■■ Professors
■■ Stockbrokers
■■

■■

Some chapter highlights include:
Chapter 6, Cost of Capital/Rates of Return, has been greatly expanded and includes
new thinking and research on risk premiums, beta, and data sources. It also
includes a section titled “20 Ways to Calculate the Cost of Equity Capital.”
Chapter 7, International Cost of Capital, is a completely new chapter that delves
deeply into the various methods and data sources used in the valuation of
companies outside the U.S.
Chapter 8, Market Approach, has been updated and includes new thoughts on
the use of transaction databases.
Chapter 10, Valuation Discounts and Premiums, expands on discounts, including new quantitative models for discounts for lack of marketability. It also
includes a new method for using restricted stock transaction data.

Chapter 11, Report Writing, includes a new valuation report that is in compliance with the business valuation standards of the AICPA (SSVS), ASA, IBA,
NACVA, and USPAP.
Chapter 12, Business Valuation Standards, has been updated to include the use
of calculation engagements and calculation reports.
Chapter 13, Pass-Through Entities, has been updated and expanded to include
the use of the discount rate to capture value in a pass-through entity.
Chapter 22, Reasonable Compensation, is a completely new chapter that presents the methods, models, and tools to determine reasonable compensation.
Chapter 26, Business Damages, has been rewritten and expanded.
Chapter 29, Healthcare Compensation, is a completely new chapter devoted to
calculation of fair market compensation.
Chapter 31, Valuation Views, has been completely rewritten and includes a
detailed case study and report that delves into controversial issues.
This book also includes a companion website, which can be found at www
.wiley.com/go/FVAM4E, which includes additional chapter addendums referenced
throughout the book.
Financial valuations are very much affected by specific facts and circumstances.
Consequently, the views expressed in these written materials do not necessarily
reflect the professional opinions or positions that the authors would take in every
business valuation assignment or in providing business valuation services in connection with an actual litigation matter. Every situation is unique, and differing facts and
circumstances may result in variations of the applied methodologies. Furthermore,
valuation theory, applications, and methods are continually evolving and at a later
date may be different than what is presented here. Nothing contained in these written materials shall be construed as the rendering of valuation advice, the rendering of


xx

Preface

a valuation opinion, the rendering of an opinion of a particular valuation position,
or the rendering of any other professional opinion or service. Business valuation

services are necessarily fact-sensitive, particularly in a litigation context. Therefore,
the authors urge readers to apply their expertise to particular valuation fact patterns
that they encounter, or to seek competent professional assistance as warranted in the
circumstances. Jim Alerding, Rosanne Aumiller, Jeff Balcombe, Neil Beaton, Melissa
Bizyak, Marcie Bour, Jim Budyak, Carol Carden, Stacy Collins, Larry Cook, Don
Drysdale, Ed Dupke, Jay Fishman, Chris Hamilton, Tom Hilton, Jim Hitchner, Vince
Kickirillo, Mark Kucik, Eva Lang, Harold Martin, Ed Moran, Ray Moran, Kate
Morris, Shannon Pratt, Ron Seigneur, Stacey Udell, Sam Wessinger, Richard Wise,
Don Wisehart, Kevin Yeanoplos.

Disclaimer Excluding Any Warranties: This book is designed to provide guidance to analysts, auditors, and management but is not to be used as a substitute
for professional judgment. Procedures must be altered to fit each assignment.
The reader takes sole responsibility for implementation of material from this
book. The implied warranties of merchantability and fitness of purpose and all
other warranties, whether expressed or implied, are excluded from this transaction and shall not apply to this book. Neither the authors, editors, reviewers,
nor publisher shall be liable for any indirect, special, or consequential damages.


About the Editor

J

ames R. Hitchner, CPA/ABV/CFF, ASA, is the managing director of Financial
Valuation Advisors, Inc. in Ventnor City, New Jersey. He is also president of the
Financial Consulting Group, LLC, a national association of professional services
firms dedicated to excellence in valuation, financial, and litigation/forensic consulting. He is CEO of Valuation Products and Services, LLC, a company that develops
educational resources for valuation analysts and fraud/forensics practitioners. He
holds the American Institute of Certified Public Accountants (AICPA) specialty designations of Accredited in Business Valuation (ABV) and Certified in Financial Forensics (CFF) and is an Accredited Senior Appraiser (ASA) with the American Society
of Appraisers. Mr. Hitchner has over 37 years of experience in valuation services.
He has often testified as a qualified expert witness on valuations in federal and state

courts in numerous states.
He has coauthored over 20 courses, taught over 60 courses, published over 100
articles, and made over 350 conference presentations and webinars. Mr. Hitchner is
editor/coauthor of the book Financial Valuation Applications and Models (FVAM),
4th edition (2017), coauthor of the book Financial Valuation Workbook (FVW), 4th
edition (2017), and coauthor of the book Valuation for Financial Reporting: Fair
Value, Business Combinations, Intangible Assets, Goodwill, and Impairment Analysis,
3rd edition (2011)—all published by John Wiley & Sons. He is coauthor of PPC’s
Guide to Business Valuations, 27th edition (2017), published by Thomson Reuters,
and coauthor of A Consensus View, Q&A Guide to Financial Valuation (2016),
published by Valuation Products and Services, LLC. He is editor in chief of Financial
Valuation and Litigation Expert, a bimonthly journal that presents views and tools
from some of the leading experts in valuation, forensics/fraud, and litigation services.
Mr. Hitchner is an inductee in the AICPA Business Valuation Hall of Fame and
was twice a recipient of the AICPA’s Business Valuation Volunteer of the Year award.
He was also one of the only four members of the original AICPA Business Valuation
Standards Writing Task Force and served the entire six years up to the June 2007
official release of the standards. Mr. Hitchner is past chairman of the Business Valuation Committee of the Georgia Society of CPAs, past member of the AICPA Business
Valuation Subcommittee, past member of the AICPA ABV Exam Committee, and
past chairman of the ABV Exam Review Course Committee. He has a Bachelor of
Science degree in engineering from the University of Pittsburgh and Master of Business Administration degree from Rider University.

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About the Authors

R. James (Jim) Alerding, CPA/ABV, ASA, is the owner of Alerding Consulting,
LLC, in Indianapolis, Indiana. He is a CPA and holds the AICPA specialty designation of Accredited in Business Valuation (ABV) and is an Accredited Senior Appraiser
(ASA) with the American Society of Appraisers. Mr. Alerding has over 46 years of

financial/accounting/investment experience, including over 35 years of business
valuation experience. He has taught over 40 valuation courses, published numerous articles, and made over 100 business valuation presentations. He has been
recognized as an expert witness in numerous states and in state and federal courts
across the United States and has testified approximately 500 times in depositions and
trials. Mr. Alerding was a member of the writing task force for the AICPA Statement
on Standards for Valuation Services No. 1 (VS100), a past member of the AICPA
Business Valuation Subcommittee, and an AICPA Business Valuation Hall of Fame
Member. He is a summa cum laude graduate of Xavier University with a bachelor’s
degree in accounting.
Rosanne J. Aumiller, CPA/ABV/CFF, ASA, is a director at Grant Thornton LLP
in Cleveland, Ohio. Ms. Aumiller provides business valuation services, expert testimony, consulting, and analysis for parties in litigation. She has over 25 years of
professional experience. Prior to joining Grant Thornton, she provided these services
while a principal at boutique financial consulting and valuation firms, during her 10
years at a regional accounting firm and while employed for several years at Key Bank
in the Valuation Services group. She holds the AICPA specialty designations of Accredited in Business Valuation (ABV) and Certified in Financial Forensics (CFF) and
is an Accredited Senior Appraiser (ASA) with the American Society of Appraisers.
Ms. Aumiller has over 20 years of experience in valuation services and has testified
as an expert witness. She has served as a member of the AICPA FVS Executive Committee, the AICPA Business Valuation Committee, and the AICPA ABV Credential
Committee. Ms. Aumiller is a current member of the Cleveland Metropolitan Bar
Association Foundation. She is also a contributing editor of the AICPA FVS Digest.
Jeff Balcombe, CPA/ABV/CFF/CGMA, CFA, ASA, is president, chief executive
officer, and partner of BVA Group, a nationally recognized litigation, valuation, and
financial advisory firm. Mr. Balcombe leads the firm’s management committee and
all aspects of the firm’s services, including valuations, financial advisory services,
and dispute consulting. Mr. Balcombe has testified dozens of times on issues related
to economic damages and lost profits analyses, patent and copyright infringement,
misappropriation of trade-secret violations, purchase price disputes, wrongful contract termination, shareholder disputes, financial fraud allegations, securities class
actions, and valuation issues, including solvency and matters ranging from small commercial disputes to conflicts with over $25 billion at stake. Mr. Balcombe has been

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About the Authors

involved in hundreds of valuations performed for various purposes, including financial reporting, tax, ESOPs, solvency opinions, and fairness opinions.  Although he
has broad industry experience, Mr. Balcombe has led numerous assignments in the
energy industry in particular. Additionally, he writes about the insurance industry for
the International Risk Management Institute and is on the panel of experts for the
Financial & Valuation Litigation Expert journal.
Neil J. Beaton, CPA/ABV/CFF, CFA, ASA, is a managing director with Alvarez
& Marsal Valuation Services, LLC. Mr. Beaton specializes in the valuation of public
and privately held businesses and intangible assets for purposes of litigation support
(shareholder disputes, lost profits claims, marriage dissolutions, and others), acquisitions, sales, buy-sell agreements, ESOPs, incentive stock options, and estate planning
and taxation. He also performs economic analysis for personal injury claims, wrongful termination, and wrongful death actions. Mr. Beaton earned a BA in economics
from Stanford University and a master’s degree in finance from National University. He is a Certified Public Accountant (CPA), Chartered Financial Analyst (CFA),
and Accredited Senior Appraiser (ASA). Additionally, he is Accredited in Business
Valuation (ABV) and Certified in Financial Forensics (CFF). Mr. Beaton is a frequent lecturer at universities, is an instructor for various business valuation courses,
and speaks nationally on business valuation with a special emphasis on early-stage
and high-technology companies. Mr. Beaton has written two books on early-stage
company valuation, has contributed to a number of other books on valuation and
damages issues, and has written numerous articles on these topics. He is a former
co-chair of the AICPA’s Valuation of Private Equity Securities Task Force, a former member of the AICPA’s ABV Exam Committee, and has served on the AICPA’s
Mergers & Acquisitions Disputes Task Force. He is currently a member of the Business Valuation Update Editorial Advisory Board, a member of the Board of Experts
for the publication, Financial Valuation and Litigation Expert, and on the Editorial
Board of the National Association of Certified Valuation Analysts’ Value Examiner.
Melissa Bizyak, CPA/ABV/CFF, CVA, is a partner in charge of business valuation and litigation support services for Grossman Yanak & Ford in Pittsburgh,
Pennsylvania. She has practiced in public accounting for over 20 years and has significant experience in business valuation and tax-related issues for privately held
concerns and their owners. Ms. Bizyak’s business valuation experience is diverse,

including valuations of companies in the manufacturing, oil and gas, and technology industries. These valuations have been performed for various purposes such as
financial reporting, equitable distributions, buy-sell transactions, dissenting shareholder disputes, employee stock ownership plans (ESOPs) value enhancement, and
gift and estate tax purposes. She also provides litigation support services including
expert witness testimony. Ms. Bizyak is a certified public accountant. She holds the
AICPA specialty designations of Accredited in Business Valuation (ABV) and Certified in Financial Forensics (CFF). She earned the AICPA Certificate of Achievement
in business valuation and is a Certified Valuation Analyst (CVA). Ms. Bizyak is also a
member and past chair of the Executive Advisory Board of the National Association
of Certified Valuators and Analysts (NACVA).
Marcie D. Bour, CPA/ABV, CVA, CFE, MAFF, ABAR, is a partner at Yip Associates, a forensic accounting and financial investigations firm. With over 30 years of
professional experience, she serves as the firm’s Valuation Services Practice Leader.


About the Authors

xxv

Ms. Bour has served on a number of national boards including the National Association of Certified Valuators and Analysts’ Executive Advisory Board and its Litigation Forensics Board. She also served as the chair of the Board of Governors of the
Institute of Business Appraisers. Ms. Bour is an instructor in the area of economic
damages, having led a team to develop NACVA’s workshop “Business Interruption
Losses and Claims.” She has moderated a number of webinars on the topic of business income losses for insurance claims. She has spoken at valuation conferences on
lost profits damages and valuation issues. In addition to her involvement with professional organizations, Ms. Bour has been involved with the Florida Bar as a member of a Bar Grievance Committee, serving three, three-year terms. She also served a
three-year term on a Florida Bar Unlicensed Practice of Law Committee. Ms. Bour
has testified at deposition or trial in economic damage, shareholder dispute, matrimonial, usury, and criminal sentencing cases. Her valuation and litigation experience
covers a wide variety of industries. Ms. Bour graduated from Emory University with
a BBA, earning distinction in accounting. Her business valuation credentials include
the Accredited in Business Valuation (ABV) from the AICPA, and the Certified Valuation Analyst (CVA), Master Analyst in Financial Forensics (MAFF), and Accredited
in Business Appraisal Review (ABAR) from NACVA. She is a CFE Certified Fraud
Examiner (CFE), Business Valuator Accredited for Litigation (BVAL—retired designation), and has a Certification in Distressed Business Valuation (CDBV).
James T. Budyak, CPA/ABV, CFA, ASA, is senior vice president at Valuation
Research Corporation (VRC), an independent, full-service business valuation firm

headquartered in Milwaukee, Wisconsin, that has provided objective, supportable
conclusions of value for domestic and international clients of all sizes and industries
since 1975 through its global network of nearly 1,000 valuation professionals. Mr.
Budyak holds the designations of certified public accountant (CPA), Accreditation
in Business Valuation (ABV), and Accredited Senior Appraiser (ASA), and is a Chartered Financial Analyst® (CFA®) charterholder. Mr. Budyak has over 30 years of valuation services experience, specializing in allocation of purchase price engagements,
corporate tax and closely held business valuations, fairness and solvency opinions,
bankruptcies and restructurings, and litigation support. He has extensive experience
with financial reporting and income tax audits, and has been deposed on valuation
matters. He is a past-elected board member of the American Society of Appraisers
Business Valuation Committee (BVC) and the Milwaukee Investment Analysts Society. He has served clients in most major industries, studied dozens of countries and
visited over 40, and authored numerous articles and speeches on the international
cost of capital.
Carol Carden, CPA/ABV, ASA, CFE is a principal with Pershing, Yoakley &
Associates and provides business valuation and related consulting services to a wide
variety of business organizations, primarily in the healthcare industry. She has performed appraisals of businesses and securities for a wide variety of purposes such
as mergers, acquisitions, joint ventures, management service agreements, and other
intangible assets. She is also a nationally recognized speaker and writer on healthcare valuation topics. In addition to being a Certified Public Accountant, she has also
earned the Accredited in Business Valuation (ABV) credential from the American
Institute of Certified Public Accountants, the Accredited Senior Appraiser (ASA) credential from the American Society of Appraisers, and the Certified Fraud Examiner
(CFE) credential from the Association of Certified Fraud Examiners. She was the


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About the Authors

chair of the Executive Committee for Forensic and Valuation Services from 2013 to
2016 and former chair of the Business Valuation Committee for the AICPA, former
chair of the 2010 National AICPA Business Valuation Conference, and was on the
planning committee for the 2011 AICPA National Healthcare Conference. She was

inducted into the Business Valuation Hall of Fame of the AICPA in 2013.
Stacy Preston Collins, CPA/ABV/CFF, is a managing director with Financial Research Associates. She is a frequent speaker and author on business valuation, forensic accounting, and related issues. Her experience includes marital dissolution cases,
corporate litigation, estate planning valuations, and transactions. She has provided
expert witness testimony on valuation/forensic accounting issues in several states.
Ms. Collins is a charter member of the Forensic and Business Valuation Division of
the American Academy of Matrimonial Lawyers (AAML) Foundation. She has been
a faculty member for several years with the Family Law Trial Advocacy Institute,
sponsored by the National Institute of Trial Advocacy and the American Bar Association, and the AAML’s Institute for Family Law Associates. Ms. Collins is past chair
of the AICPA’s Family Law Task Force, a former member of the AICPA’s Forensic and
Litigation Services Committee, and was the 2010 AICPA FLS Volunteer of the Year.
Larry R. Cook, CPA/ABV/CFF, CBA, CVA, focuses on valuation and financial
consulting to private companies and their owners, as well as assists in family law
matters in the division of complex marital estates. With over 40 years of business
and valuation experience, Mr. Cook has testified as an expert in valuation, usury, and
family law matters, as well as in a public hearing before the Department of Labor
on fiduciary responsibility quandaries. He has authored the book Financial Valuation of Employee Stock Ownership Plan Shares, written articles, and participated as
a speaker/instructor for courses on diverse financial topics for national, state, and
local events. Mr. Cook has served in many capacities with the AICPA as chair of the
initial ABV Credential Committee, member of the Management Consulting Executive Committee, member of the Specialization Subcommittee, and original member
of the Business Valuation Subcommittee. His service to the profession also includes
national, state, and local organizations. He was a member of the Board of Directors
of the Texas Society of CPAs, the Board of Director of the Houston Chapter of CPAs,
the original Business Valuation Standards for Professional Practice Committee of the
Institute of Business Appraisers, regional governor of the IBA, and on the qualifications review committee of the IBA. A native Texan, he is a graduate (BBA) of the first
class (1972) of accounting majors from Sam Houston State University.
Don M. Drysdale, CPA/ABV, ASA, is the managing member of Gibraltar Business Valuations with offices in Longmont, Colorado (Denver area), Lisle, Illinois
(Chicago area), and Clearfield, Utah (Salt Lake City area). He is a certified public
accountant in Arizona and Utah and holds the AICPA specialty designation of Accredited in Business Valuation (ABV). He is also an Accredited Senior Appraiser (ASA)
with the American Society of Appraisers, and is a member of the Appraisal Issues
Task Force. Mr. Drysdale has 30 years of financial and accounting experience,

with 20-plus years of providing business valuation services. He has considerable
experience in lecturing to academic and professional organizations, including the
University of Arizona, the University of Utah, the American Institute of Certified Public
Accountants, the American Society of Appraisers, the National Association of Certified
Valuation Analysts, the Institute of Business Appraisers, the Arizona Society of CPAs,


About the Authors

xxvii

the Utah Association of CPAs, and others. He has a Bachelor of Arts degree in accounting from Weber State University.
Edward J. Dupke, CPA/ABV/CFF/CGMA, ASA, is president and CEO of Dupke
Consulting, LLC, based in Sun City West, Arizona. He holds the AICPA specialty
designations of Accredited in Business Valuation (ABV), Certified in Financial Forensics (CFF), and Chartered Global Management Accountant (CGMA). He also holds
the Accredited Senior Appraiser (ASA) designation from the American Society of
Appraisers. Mr. Dupke is a former chairman of the AICPA Business Valuation Committee and a former chairman of the Michigan Association of CPAs. He has over 35
years of professional experience in public accounting and business valuation practice. He has been qualified as an expert witness in both state and federal courts and
is a regular instructor in business valuation at both the state and national level. Mr.
Dupke is a former member of the AICPA Board of Directors and chaired the AICPA
task force writing the first business valuation standard for AICPA members. He is a
member of the AICPA Business Valuation Hall of Fame. He is the recipient of special
recognition awards from both the AICPA and the Michigan Association of CPAs for
his work on the business valuation standards. He is a contributing author to several
valuation specialty texts and a member of the panel of experts of Financial Valuation and Litigation Expert. In 2008, he was named by Accounting Today magazine
as one of the top 100 most influential CPAs. He holds a Bachelor of Science degree
in business administration from Wayne State University.
Jay E. Fishman, FASA, is a managing director of Financial Research Associates
and has been actively engaged in the appraisal profession since 1974. He specializes
in the valuation of business enterprises and their intangible assets. Mr. Fishman has

coauthored several books, including the highly acclaimed guide to business valuations (with Shannon Pratt and James Hitchner) and standards of value (with Shannon Pratt and William Morrison). He has also written numerous articles on business
valuation as well as qualifying as an expert witness and providing testimony in 12
states. He has taught courses on business valuation to the Internal Revenue Service,
the National Judicial College, the Hong Kong Society of Accountants, and on behalf
of the World Bank in St. Petersburg, Russia. He recently taught courses in Moscow,
Russia, for Kwinto Management and for the Slovenian Institute of Auditors in
Ljubljana, Slovenia. He holds bachelor’s and master’s degrees from Temple University
as well as an MBA from LaSalle University. Mr. Fishman is a fellow of the American
Society of Appraisers, a fellow of the Royal Institution of Chartered Surveyors, a
former chairman of the Business Valuation Committee of the American Society of
Appraisers, editor of the Business Valuation Review, chair of ASA’s Government
Relations Committee, a former trustee of the Appraisal Foundation, and a member
of the Appraisal Standards Board of the Appraisal Foundation. He recently completed a six-year term as a member of the Appraisal Practice Board of the Appraisal
Foundation. He recently was awarded the Chairman’s Public Service Award from the
Appraisal Foundation. The award was established in 2005 to recognize individuals
who have worked with the foundation for the benefit of the appraisal profession and
who, in the process, have gone above and beyond the call of duty.
Chris Hamilton, CPA, CFE, CVA, DABFA, is President and Principal of the Arxis
Group, headquartered in Simi Valley, CA. Most of his professional time is spent in the
areas of business valuations, forensic accounting, and litigation-related engagements.