Author Archives: William Kunz

About William Kunz

William Kunz is a senior manager in Aronson's Forensic & Valuation Services Group. He has more than 17 years of corporate finance, investment banking, valuation, litigation support and business consulting experience, serving various types of businesses, including retail, wholesale, service, healthcare, hospitality, professional services, venture capital, construction and information technology businesses. William specializes in litigation support services, such as valuations of closely-held businesses, evaluation of accounting and tax issues, financial analysis and investigations, general business issues and related forensic support services. He has submitted more than 100 expert reports and valuations for federal litigation, as well as litigation in Virginia, Maryland and Washington, D.C.

William Kunz

Business Valuations – Litigation Landmines (Part 2)

It is not uncommon for the valuation of a privately-held business to be one of the central issues in a litigation matter, such as a shareholder dispute or a family law matter. When this is the case, the attorneys representing the parties to the dispute will need to be on the lookout for litigation landmines.

As previously covered in Part 1 of this series, we were assisting in a family law matter in Virginia and were provided a prior valuation report of a business to review. Aronson expressed our concerns with the purpose of the valuation (gift tax) and the standard of value (fair market value) to the client. We continue that discussion with another concern, the date of the valuation. The valuation date of the report preceded the date of the divorce trial by about 15 months. Business valuation reports are date-specific, and while it is possible that the value of the business had been static, based on our initial research it appeared the company had achieved a few significant milestones during the intervening months.

There are no hard and fast rules concerning business valuation reports and the length of time until “expiration.” A valuation report could be more than 15 months old and still reasonably represent the value of a business, or a report could be three months old and be woefully out-of-date. Some factors that could influence this include: the industry, addition/loss of contracts or customers, stability of management, technological changes and changes in the competitive environment.

litigation

Depending on the facts and circumstances of a matter, as well as the jurisdiction, the date of a valuation can be a critical, yet sometimes overlooked, element in a litigation matter. For example, in the aforementioned family law matter in Virginia, any of the dates to the left could be the date(s) required to have a business valued.

Navigating and deciphering a valuation report can be tricky business. Making a determination as to its current validity as well as identifying the proper valuation date(s) are just some of the many issues to be addressed. To learn more about how Aronson’s Financial Advisory Services team helps attorneys untangle complex financial disputes and conduct accounting investigations, click here; or, please contact Will Kunz at 301.222.8216 or wkunz@aronsonllc.com.

Business Valuations – Litigation Landmines (Part 1)

It is not uncommon for the valuation of a privately-held business to be one of the central issues in a litigation matter, such as a shareholder dispute or a family law matter. When this is the case, the attorneys representing the parties to the dispute will need to be on the lookout for litigation landmines.

Recently, an attorney we were assisting on a family law matter in Virginia was provided a valuation report of a business in which his client’s spouse had a non-controlling ownership interest. Opposing counsel wanted the parties to stipulate to the value set forth in this valuation report. The attorney forwarded the report and asked us to give him our thoughts. After reading the first few pages of the report, we quickly realized that using the value stated in this report might cause the marital estate to be significantly undervalued.

Our immediate concerns had to do with the purpose of the valuation and the standard of value. The purpose of a valuation will often dictate litigationthe standard of value. For example, estate and gift tax returns are required to be based on a Fair Market Value standard, while valuations done for GAAP purposes are generally required to be on a Fair Value standard. The report provided by opposing counsel was prepared under the Fair Market Value standard in connection with a gift tax return.

In this case the litigation was based in Virginia, so the applicable standard of value was Intrinsic Value. The valuation report from opposing counsel included a discount for lack of marketability of 30% (not uncommon with a fair market valuation of a non-controlling ownership interest). This type of discount is typically not applicable under the Intrinsic Value standard. After we communicated our aforementioned concerns to the attorney, the stipulation was not agreed to. Fast-forwarding a bit … a new valuation was prepared on an Intrinsic Value basis, which the parties used to reach a settlement agreement that reflected a substantially higher value with respect to the interest in the company. Landmine avoided!

Navigating and deciphering a valuation report can be tricky business. Identifying the proper standard of value is only one of many issues to be addressed. To learn more about how Aronson’s Financial Advisory Services team helps attorneys untangle complex financial disputes and conduct accounting investigations, contact Will Kunz  at 301.222.8216 or wkunz@aronsonllc.com.

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