Willamette Perspectives

July 2023

Editor for this issue: Timothy J. Meinhart, Managing Director and Leader of Shareholder Litigation Valuation Services Practice of our firm in our Chicago office.

Understanding the Implications of Cecil v. Commissioner

Grant Crum

In Cecil v. Commissioner, the U.S. Tax Court was faced with a dispute involving the valuation of a noncontrolling interest in a privately held S corporation. The valuation experts retained by the taxpayers and the Internal Revenue Service tax-affected the earnings of an S corporation and applied the S Corporation Economic Adjustment Multiple, even though both analyses had not been generally accepted by the Court. The ruling provides valuation analysts with guidance about valuing a noncontrolling interest in S corporation stock.

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How to Properly Use Asset Transactions in the Guideline Merged and Acquired Company Method

Tia R. Hutton and Lisa H. Tran

In utilizing the guideline merged and acquired company method to estimate a value for a closely held company, particularly a smaller business, the valuation analyst typically will find more transactions of private guideline companies than publicly traded companies. Most transactions of small, private companies are structured as asset sales. Although both asset sales and stock sales can be used to develop a value indication for a subject company, it is inappropriate to combine the transactions without making proper adjustments. Assets sales and stock sales are different transaction structures, and the transaction price often reflects the transfer of different assets and liabilities, which will have a direct effect on the pricing multiples used to value the subject company.

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Getting the Most out of Every Engagement

Timothy J. Meinhart and Marc D. Bello

Marc Bello has joined Willamette Management Associates in the midst of a distinguished 20-year career in business valuation and forensic analysis. For Bello, success stems from many skills, but particularly important are education, personal development, and integrity. Understanding the financial landscape is crucial to business valuation and forensic analysis because it leads to proper questions that produce the necessary documents essential for a supportable result. Additionally, incorporating a wholistic approach that analyzes industry and nonfinancial data leads to a supportable valuation. Finally, clear communication creates understanding between an analyst and a client throughout an engagement.

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