Your SlideShare is downloading. ×
Mercer Capital | Business Valuation Profession by the Numbers & Outlook | 2012
Upcoming SlideShare
Loading in...5
×

Thanks for flagging this SlideShare!

Oops! An error has occurred.

×

Saving this for later?

Get the SlideShare app to save on your phone or tablet. Read anywhere, anytime - even offline.

Text the download link to your phone

Standard text messaging rates apply

Mercer Capital | Business Valuation Profession by the Numbers & Outlook | 2012

628
views

Published on

In this May 2012 presentation, Timothy R. Lee, ASA from Mercer Capital, provides some perspective on the size of the business valuation profession and the outlook for the future. …

In this May 2012 presentation, Timothy R. Lee, ASA from Mercer Capital, provides some perspective on the size of the business valuation profession and the outlook for the future.

For more information, contact Tim Lee at 901.685.2120 or email him at leet@mercercapital.com.

www.mercercapital.com

Published in: Economy & Finance, Business

0 Comments
2 Likes
Statistics
Notes
  • Be the first to comment

No Downloads
Views
Total Views
628
On Slideshare
0
From Embeds
0
Number of Embeds
0
Actions
Shares
0
Downloads
22
Comments
0
Likes
2
Embeds 0
No embeds

Report content
Flagged as inappropriate Flag as inappropriate
Flag as inappropriate

Select your reason for flagging this presentation as inappropriate.

Cancel
No notes for slide

Transcript

  • 1. The Business Valuation ProfessionThe Numbers and the OutlookTimothy R. Lee, ASAMERCER CAPITALleet@mercercapital.com » 901.685.2120www.mercercapital.com Presentation given by Timothy R. Lee, ASA, Mercer Capital, to Memphis Tax Watch Group. May 2, 2012. © Mercer Capital, 2012. Reproduction is prohibited without prior consent of Mercer Capital. | 901.685.2120 | www.mercercapital.com 1
  • 2. Timothy R. Lee, ASA Timothy R. Lee, ASA is a senior vice president and board director at Mercer Capital and leads the firm’s corporate valuation group. Tim’s practice encompasses valuation and financial advisory services for purposes including transactions, employee stock ownership plans, estate and gift tax planning and compliance, management and ownership succession, buy-sell agreement planning and execution, and corporate planning and reorganizations. Additionally, Tim provides consulting expertise in a variety of litigation and controversy matters involving dissenting shareholder rights, marital dissolution, Timothy R. Lee, ASA tax matters, corporate litigation, and shareholder conflicts.Leader, Corporate Valuation Group MERCER CAPITAL 901.685.2120 Tim is co-author of the book, A Reviewer’s Handbook to Business Valuation with L. leet@mercercapital.com Paul Hood, Jr., JD, LLM, published in 2011 by John Wiley & Sons, Inc. www.MercerCapital.com For more information about Tim’s practice and to view his complete CV, visit www.mercercapital.com. Presentation given by Timothy R. Lee, ASA, Mercer Capital, to Memphis Tax Watch Group. May 2, 2012. © Mercer Capital, 2012. Reproduction is prohibited without prior consent of Mercer Capital. | 901.685.2120 | www.mercercapital.com 2
  • 3. From Concepts to Action KnowledgeMercer Capital’s mission is toleverage our expertise in ameaningful work environment by Executionidentifying, attracting, and Communication Recognitiondeveloping extraordinarycolleagues and appreciativeclients and to provide specializedfinancial advisory services withintegrity and professionalexcellence Relevance Presentation given by Timothy R. Lee, ASA, Mercer Capital, to Memphis Tax Watch Group. May 2, 2012. © Mercer Capital, 2012. Reproduction is prohibited without prior consent of Mercer Capital. | 901.685.2120 | www.mercercapital.com 3
  • 4. The Business of BV » From a Mercer Capital perspective (not for everyone but it’s worked for us!)  MC basics (staff, project flow, rate structures, management, equity)  Evolution: from generalists to multi-specialty (creating expertise)  Operating leverage, training, and hiring practices (internal v. external)  Budget management v. utilization and rate focus (billable v. non-billable yield)  Internal organization (service lines & industry groups, leverage & delegation)  Business development, social media, publishing » Institutional (indirect) versus relationship model (direct) » Leveraging your clients and their affiliations Presentation given by Timothy R. Lee, ASA, Mercer Capital, to Memphis Tax Watch Group. May 2, 2012. © Mercer Capital, 2012. Reproduction is prohibited without prior consent of Mercer Capital. | 901.685.2120 | www.mercercapital.com 4
  • 5. Current Challenges for BVers » It’s hard out there being a business appraiser!  Cyclicality and volatility, weird data (valuation is hard work these days)  Proliferating methodologies (DLOM, equity premiums, S corps, etc.)  IRS and the tax court (S corps, discounts, etc.)  Fee constraints and service delivery (MC response and approach)  Proliferation of appraisers and specialty credentials (competition, perceived expertise)  Threat of increasing regulation and backlash (SEC, DOL, IRS, FINRA, Tax Court)  Increased audit risk (IRS scrutiny and capacity, DLOM Job Aid, etc.)  Desperate clients and referral sources (don’t make their problems your problem!)  Professional exit planning and succession Presentation given by Timothy R. Lee, ASA, Mercer Capital, to Memphis Tax Watch Group. May 2, 2012. © Mercer Capital, 2012. Reproduction is prohibited without prior consent of Mercer Capital. | 901.685.2120 | www.mercercapital.com 5
  • 6. Current Opportunities  Which events in the ownership transfer matrix are you capable of servicing?  Specialization by industry or other niche  Financial reporting requirements (FASB ASCs)  Gift and estate tax work (re-emergence of tax planning)  Deferred planning activities during financial bust and tax uncertainty  Deferred deal activity from weak economics and financing constraints  Evolution of private equity as an exit strategy for larger businesses  Growing use of valuation as a private wealth and management assessment tool  Controversy services (litigation, ADR)  Buy-Sell Agreements (for you and your referral) Presentation given by Timothy R. Lee, ASA, Mercer Capital, to Memphis Tax Watch Group. May 2, 2012. © Mercer Capital, 2012. Reproduction is prohibited without prior consent of Mercer Capital. | 901.685.2120 | www.mercercapital.com 6
  • 7. The Market – A Few Numbers ≫ SBA definitions for small business (private, not dominant in market share)  Manufacturing: Maximum number of employees may range from 500 to 1500, depending on the type of product manufactured;  Wholesaling: Maximum number of employees may range from 100 to 500 depending on the particular product being provided;  Services: Annual receipts may not exceed $2.5 to $21.5 million, depending on the particular service being provided;  Retailing: Annual receipts may not exceed $5.0 to $21.0 million, depending on the particular product being provided;  General and Heavy Construction: General construction annual receipts may not exceed $13.5 to $17 million, depending on the type of construction;  Special Trade Construction: Annual receipts may not exceed $7 million;  Agriculture: Annual receipts may not exceed $0.5 to $9.0 million, depending on the agricultural product. Presentation given by Timothy R. Lee, ASA, Mercer Capital, to Memphis Tax Watch Group. May 2, 2012. © Mercer Capital, 2012. Reproduction is prohibited without prior consent of Mercer Capital. | 901.685.2120 | www.mercercapital.com 7
  • 8. The Market – A Few Numbers≫ SBA segmentation of firms (2008 data; nonfarm; $000s) Headcount Firms Establishments Employment Payroll 617,000 Presentation given by Timothy R. Lee, ASA, Mercer Capital, to Memphis Tax Watch Group. May 2, 2012. © Mercer Capital, 2012. Reproduction is prohibited without prior consent of Mercer Capital. | 901.685.2120 | www.mercercapital.com 8
  • 9. The Market – A Few Numbers ≫ U.S. wealth segmentation (anecdotal figures from Occupy WS article)  Wealthiest 1% of the households own 34.6% of private wealth and 42.7% of financial wealth  U.S. has greater wealth concentration than India and China; on par with Mexico and Iran; higher than 94 of the 34 countries measured (CIA)  On one hand, increasing wealth concentration reduces opportunity for valuation volume; on the other, this class of business owner may look more to valuation as a multi-faceted tool ≫ ESOPs  About 11,500 in the U.S.; 7,000 ESOPs considered significant to sponsor  Perhaps 10-20% are externally entrusted ≫ Taxable estates under current laws  About one-tenth the numbers of taxable estates under current law ($5mm) than prior law (9,300v.82,800 estimated filers and 3,900v. 39,800 taxable; Tax Foundation) Presentation given by Timothy R. Lee, ASA, Mercer Capital, to Memphis Tax Watch Group. May 2, 2012. © Mercer Capital, 2012. Reproduction is prohibited without prior consent of Mercer Capital. | 901.685.2120 | www.mercercapital.com 9
  • 10. The Market – A Few Numbers ≫ Credentialed Professionals (ballpark figures, no one really knows!) • CBA 600 +/- • ASA 1,500 +/- • ABV 3,000 +/- • CVA / AVA 7,000 +/- • CFA 4,000 +/- • Total active professionals is perhaps 13,000 to 16,000 (say 14,500) • Non-credentialed practitioners, industry crowd, academia, etc. • Review appraisers in larger audit firms • Non-credentialed paraprofessional support • Using estimates based on 65% utilization, $150/hour rates – Is BV a $3.0 billion profession? (Average billings per professional of $200,000 annually and 20 assignments? Total annual project flow of 350,000 assignments) Presentation given by Timothy R. Lee, ASA, Mercer Capital, to Memphis Tax Watch Group. May 2, 2012. © Mercer Capital, 2012. Reproduction is prohibited without prior consent of Mercer Capital. | 901.685.2120 | www.mercercapital.com 10
  • 11. Business Appraisers Survey Information» In Winter 2011 Pepperdine Private Capital Markets Project Survey, there were 252 business appraiser respondents  Geographically dispersed through country. Largest concentrations in West (22%), Great Lakes (14.5%), and the North Atlantic (13.0%)  Respondents value broad range of companies with majority between $2 million and $50 million Presentation given by Timothy R. Lee, ASA, Mercer Capital, to Memphis Tax Watch Group. May 2, 2012. © Mercer Capital, 2012. Reproduction is prohibited without prior consent of Mercer Capital. | 901.685.2120 | www.mercercapital.com 11
  • 12. Business Appraisers Survey InformationPepperdine Private Capital Markets Project Survey Report IV – Winter 2011 Presentation given by Timothy R. Lee, ASA, Mercer Capital, to Memphis Tax Watch Group. May 2, 2012. © Mercer Capital, 2012. Reproduction is prohibited without prior consent of Mercer Capital. | 901.685.2120 | www.mercercapital.com 12
  • 13. Business Appraisers Survey InformationPepperdine Private Capital Markets Project Survey Report IV – Winter 2011 Presentation given by Timothy R. Lee, ASA, Mercer Capital, to Memphis Tax Watch Group. May 2, 2012. © Mercer Capital, 2012. Reproduction is prohibited without prior consent of Mercer Capital. | 901.685.2120 | www.mercercapital.com 13
  • 14. Business Appraisers Survey InformationPepperdine Private Capital Markets Project Survey Report IV – Winter 2011 Presentation given by Timothy R. Lee, ASA, Mercer Capital, to Memphis Tax Watch Group. May 2, 2012. © Mercer Capital, 2012. Reproduction is prohibited without prior consent of Mercer Capital. | 901.685.2120 | www.mercercapital.com 14
  • 15. Business Appraisers Survey InformationPepperdine Private Capital Markets Project Survey Report IV – Winter 2011 Presentation given by Timothy R. Lee, ASA, Mercer Capital, to Memphis Tax Watch Group. May 2, 2012. © Mercer Capital, 2012. Reproduction is prohibited without prior consent of Mercer Capital. | 901.685.2120 | www.mercercapital.com 15
  • 16. Business Appraisers Survey Information Assessment of business conditions over last six monthsPepperdine Private Capital Markets Project Survey Report IV – Winter 2011 Presentation given by Timothy R. Lee, ASA, Mercer Capital, to Memphis Tax Watch Group. May 2, 2012. © Mercer Capital, 2012. Reproduction is prohibited without prior consent of Mercer Capital. | 901.685.2120 | www.mercercapital.com 16
  • 17. Business Appraisers Survey Information Assessment of business conditions for next 12 monthsPepperdine Private Capital Markets Project Survey Report IV – Winter 2011 Presentation given by Timothy R. Lee, ASA, Mercer Capital, to Memphis Tax Watch Group. May 2, 2012. © Mercer Capital, 2012. Reproduction is prohibited without prior consent of Mercer Capital. | 901.685.2120 | www.mercercapital.com 17
  • 18. Investment Banker Survey Information» In Winter 2011 Pepperdine Private Capital Markets Project Survey, there were 245 investment banker respondents» Key findings:  Approximately 38% of respondents indicated that strategic buyers pay between 10-20% more in transactions than financial buyers  Roughly 20% expect to close 3 transactions over next 12 months. Nearly 41% reported transactions took 6 – 9 months to close  Variety of reasons for businesses not transacting. Approximately 19% reported the business being over-priced while nearly 15% indicated a general lack of capital to finance Presentation given by Timothy R. Lee, ASA, Mercer Capital, to Memphis Tax Watch Group. May 2, 2012. © Mercer Capital, 2012. Reproduction is prohibited without prior consent of Mercer Capital. | 901.685.2120 | www.mercercapital.com 18
  • 19. Investment Banker Survey InformationPepperdine Private Capital Markets Project Survey Report IV – Winter 2011 Presentation given by Timothy R. Lee, ASA, Mercer Capital, to Memphis Tax Watch Group. May 2, 2012. © Mercer Capital, 2012. Reproduction is prohibited without prior consent of Mercer Capital. | 901.685.2120 | www.mercercapital.com 19
  • 20. Investment Banker Survey InformationPepperdine Private Capital Markets Project Survey Report IV – Winter 2011 Presentation given by Timothy R. Lee, ASA, Mercer Capital, to Memphis Tax Watch Group. May 2, 2012. © Mercer Capital, 2012. Reproduction is prohibited without prior consent of Mercer Capital. | 901.685.2120 | www.mercercapital.com 20
  • 21. Investment Banker Survey InformationPepperdine Private Capital Markets Project Survey Report IV – Winter 2011 Presentation given by Timothy R. Lee, ASA, Mercer Capital, to Memphis Tax Watch Group. May 2, 2012. © Mercer Capital, 2012. Reproduction is prohibited without prior consent of Mercer Capital. | 901.685.2120 | www.mercercapital.com 21
  • 22. Investment Banker Survey InformationPepperdine Private Capital Markets Project Survey Report IV – Winter 2011 Presentation given by Timothy R. Lee, ASA, Mercer Capital, to Memphis Tax Watch Group. May 2, 2012. © Mercer Capital, 2012. Reproduction is prohibited without prior consent of Mercer Capital. | 901.685.2120 | www.mercercapital.com 22
  • 23. Investment Banker Survey InformationPepperdine Private Capital Markets Project Survey Report IV – Winter 2011 Presentation given by Timothy R. Lee, ASA, Mercer Capital, to Memphis Tax Watch Group. May 2, 2012. © Mercer Capital, 2012. Reproduction is prohibited without prior consent of Mercer Capital. | 901.685.2120 | www.mercercapital.com 23
  • 24. Investment Banker Survey InformationPepperdine Private Capital Markets Project Survey Report IV – Winter 2011 Presentation given by Timothy R. Lee, ASA, Mercer Capital, to Memphis Tax Watch Group. May 2, 2012. © Mercer Capital, 2012. Reproduction is prohibited without prior consent of Mercer Capital. | 901.685.2120 | www.mercercapital.com 24
  • 25. Investment Banker Survey InformationPepperdine Private Capital Markets Project Survey Report IV – Winter 2011 Presentation given by Timothy R. Lee, ASA, Mercer Capital, to Memphis Tax Watch Group. May 2, 2012. © Mercer Capital, 2012. Reproduction is prohibited without prior consent of Mercer Capital. | 901.685.2120 | www.mercercapital.com 25
  • 26. Investment Banker Survey Information Assessment of business conditions over last six monthsPepperdine Private Capital Markets Project Survey Report IV – Winter 2011 Presentation given by Timothy R. Lee, ASA, Mercer Capital, to Memphis Tax Watch Group. May 2, 2012. © Mercer Capital, 2012. Reproduction is prohibited without prior consent of Mercer Capital. | 901.685.2120 | www.mercercapital.com 26
  • 27. Investment Banker Survey Information Assessment of business conditions for next 12 monthsPepperdine Private Capital Markets Project Survey Report IV – Winter 2011 Presentation given by Timothy R. Lee, ASA, Mercer Capital, to Memphis Tax Watch Group. May 2, 2012. © Mercer Capital, 2012. Reproduction is prohibited without prior consent of Mercer Capital. | 901.685.2120 | www.mercercapital.com 27
  • 28. Investment Banker Survey InformationPepperdine Private Capital Markets Project Survey Report IV – Winter 2011 Presentation given by Timothy R. Lee, ASA, Mercer Capital, to Memphis Tax Watch Group. May 2, 2012. © Mercer Capital, 2012. Reproduction is prohibited without prior consent of Mercer Capital. | 901.685.2120 | www.mercercapital.com 28
  • 29. The Ownership Transfer Matrix Partial Sale / Transfer Total Sale / Transfer ESOP Sale of Business Outside Investor(s) Stock Exchange w/ Public Co. Things You Sales to Insiders/Relatives Stock Cash Sale to Public Co.Make Happen Combination Merger/Cash Out Installment Sale Going Public ESOP/Management Death Death Things That Divorce DivorceHappen to You Forced Restructuring Forced Restructuring Shareholder Disputes Bankruptcy Presentation given by Timothy R. Lee, ASA, Mercer Capital, to Memphis Tax Watch Group. May 2, 2012. © Mercer Capital, 2012. Reproduction is prohibited without prior consent of Mercer Capital. | 901.685.2120 | www.mercercapital.com 29
  • 30. The Ownership Timeline 25 to 35 35 to 55 55 to 65+ Business and Buy-In Strategic Cycles Sell-Out Gift-In Divorce Gift-Out Shareholders BSA Neighbors Presentation given by Timothy R. Lee, ASA, Mercer Capital, to Memphis Tax Watch Group. May 2, 2012. © Mercer Capital, 2012. Reproduction is prohibited without prior consent of Mercer Capital. | 901.685.2120 | www.mercercapital.com 30
  • 31. The Ownership Timeline » Where are your clients on the ownership timeline? » Where are you on the professional timeline and how does that compare to the needs of your firm, your clients and your personal goals and needs? » What are the external factors that might influence the demand for valuation services? Presentation given by Timothy R. Lee, ASA, Mercer Capital, to Memphis Tax Watch Group. May 2, 2012. © Mercer Capital, 2012. Reproduction is prohibited without prior consent of Mercer Capital. | 901.685.2120 | www.mercercapital.com 31
  • 32. About Mercer CapitalMercer Capital is a national business valuation and financial advisory firm.We offer a broad range of services, including corporate valuation, financial institution valuation, financialreporting valuation, gift and estate tax valuation, M&A advisory, fairness opinions, ESOP and ERISA valuationservices, and litigation and expert testimony consulting.We have provided thousands of valuation opinions for corporations of all sizes in a wide variety of industries.Our valuation opinions are well-reasoned and thoroughly documented, providing critical support for anypotential engagement.Our work has been reviewed and accepted by the major agencies of the federal government charged withregulating business transactions, as well as the largest accounting and law firms in the nation in connectionwith engagements involving their clients.For over thirty years, Mercer Capital has been bringing uncommon professionalism, intellectual rigor,technical expertise, and superior client service to a broad range of public and private companies and financialinstitutions located throughout the world. Feel confident in our experience and expertise.Mercer Capital | 901.685.2120 | www.mercercapital.com Presentation given by Timothy R. Lee, ASA, Mercer Capital, to Memphis Tax Watch Group. May 2, 2012. © Mercer Capital, 2012. Reproduction is prohibited without prior consent of Mercer Capital. | 901.685.2120 | www.mercercapital.com 32
  • 33. Mercer Capital’s Core Services» Valuation & Financial Opinions » Litigation Support Services  Succession & Shareholder Planning  Statutory Fair Value  Valuations for Corporate Tax Planning  Business Damages & Lost Profits  Valuations for Gift & Estate Tax Planning  Valuation, Labor & Contract Disputes  Fairness Opinions  Family Law & Divorce  ESOP & ERISA Advisory Services  Tax Related Controversies  Litigation Related Expert Witness Opinions  Corporate Restructuring & Dissolution  Bankruptcy Related Valuation Services  Initial Consultation & Analysis  Valuations for Buy-Sell Agreements  Testimony & Trial Support» Transaction Advisory Services » Financial Reporting Valuation Services  M&A and investment banking services  Purchase Price Allocation Services  Fairness Opinions  Impairment Testing Services  Buy-sell agreements & private company  Portfolio Valuation Services transactions  Equity-Based Compensation Valuation Services  Strategic AssessmentsMercer Capital | 901.685.2120 | www.mercercapital.com Presentation given by Timothy R. Lee, ASA, Mercer Capital, to Memphis Tax Watch Group. May 2, 2012. © Mercer Capital, 2012. Reproduction is prohibited without prior consent of Mercer Capital. | 901.685.2120 | www.mercercapital.com 33
  • 34. Omissions & Commissions Don’t miss this Errors, Challenges & Solutions in Business Appraisal Reports informative The only tangible result of the valuation process, appraisal reports are frequently subject to scrutiny and attack, not all of which are accurately webinar! substantiated. In this webinar BVR welcomes attorney Paul Hood and appraiser Tim Lee, co-authors of "A Reviewers Handbook to Business Valuation," for a look at these controversial issues and how appraisers can best prepare themselves and their reports.Sponsored by BV Resources Through a consideration of both questionable omissions and inclusions,Date: Thursday, August 9, 2012 Hood and Lee will reveal what courts – and appellate courts – have saidTime: Noon – 1:15pm (Central) about appraisal reports and the both questionable and common errors they contain.Qualifies for 1.5 CPE credits REGISTER HERE Presenters Timothy R. Lee, ASA L. Paul Hood, Jr., JD, LLM Leader, Corporate Valuation Consultant, Speaker, Group Author MERCER CAPITAL 504.452.7574 (c) 901.685.2120 paulhood@acadiacom.net leet@mercercapital.com Paul’s LinkedIn Profile www.MercerCapital.com Presentation given by Timothy R. Lee, ASA, Mercer Capital, to Memphis Tax Watch Group. May 2, 2012. © Mercer Capital, 2012. Reproduction is prohibited without prior consent of Mercer Capital. | 901.685.2120 | www.mercercapital.com 34
  • 35. Get your copy of … A Reviewer’s Handbook to Business Valuation Practical Guidance to the Use and Abuse of Business Appraisal Reports By L. Paul Hood, Jr., JD, LLM & Timothy R. Lee, ASA Focused on the practical aspects of business valuation that arise in the context of a tax valuation, this book provides a detailed analysis of the business valuation process. Discussion is included of various cases outlining errors that appraisers have made in appraisal reports, as well as in-depth examination of current appraisal industry issues that impact tax valuations. For more information and to order, visit: www.BVReviewersHandbook.com Presentation given by Timothy R. Lee, ASA, Mercer Capital, to Memphis Tax Watch Group. May 2, 2012. © Mercer Capital, 2012. Reproduction is prohibited without prior consent of Mercer Capital. | 901.685.2120 | www.mercercapital.com 35
  • 36. For more information or to book Tim as aTimothy R. Lee, ASA speaker for your next meeting, contactleet@mercercapital.com | 901.685.2120 Barbara Walters Price at 901.685.210 or email her here.Mercer Capitalwww.mercercapital.com Presentation given by Timothy R. Lee, ASA, Mercer Capital, to Memphis Tax Watch Group. May 2, 2012. © Mercer Capital, 2012. Reproduction is prohibited without prior consent of Mercer Capital. | 901.685.2120 | www.mercercapital.com 36