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In 2010, I earned the accreditation in business appraisal review, the ABAR designation. This is a newly created designation from the Institute of Business Appraisers. Quoting from the ABAR standards, "A Business Appraisal Review is intended to provide a qualitative level of assurance to the stakeholders in the business appraisal process; it is not intended to provide a second opinion or a recalculation of value."

An ABAR report offers a non-advocacy, objective, independent opinion of the appraisal process presented in an original business appraisal. The ABAR opinion is a "yea" or "nay" opinion, i.e. the original appraisal report is either "credible" or "not credible." The ABAR report presents sufficient details to support the ABAR opinion.

Stakeholders include:

• Judges, juries, lawyers, plaintiffs, defendants, Internal Revenue Service, etc., anyone involved in "trier of fact" cases where there are conflicting opinions of a business value.
• Buyers, sellers, M&A advisory professionals, accountants, boards of directors, bank loan officers, loan committees, other investors, ESOP trustees, etc., anyone involved in investment transactions or potential transactions.
• Insurance companies, claims adjusters, BP and Gulf Coast compensation award committees, etc., anyone involved with compensation claims for loss of business income or loss of business value.

Formal business appraisal is a complicated process. It involves consideration of accounting, tax, financial theory, economics, business analysis, forecasting, business appraisal methodologies, and other areas.

An ABAR analysis asks the following questions:

1. Is there sufficient data and explanations in the original business appraisal to duplicate the results?
2. Do the data and explanations supports the original opinion of value?
3. Are the appraisal methods used in the original report applicable and reliable?
4. 4. Were there any significant analytical gaps in the:
   • Economic Analyses?
   • Industry Analyses?
   • Financial Analyses?
   • Company Analyses?
5. Did these same analyses support any forward looking assumptions and projections made?
6. Were the conclusions drawn within the report probative, relevant and supporting of the final opinion of value?
7. Is the appraisal report in conformance with generally accepted appraisal practives in the United States as of the valuation date?
8. Other questions that may arise from the facts and circumstances presented in the original appraisal report.

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Common Errors in Applying Discounts and Premiums

Applying Discounts or Premiums regarding control and marketability is one area where appraisals are often inconsistent with the facts and circumstances of the case. The following is a partial list of common errors quoted from "Business Valuation Discounts and Premiums" by Shannon Pratt, 2nd edition.

• Using Synergistic Acquisition Premiums to Quantify Premiums for Control
• Assuming That the Discounted Cash Flow Valuation Method Always Produces a Minority Value
• Assuming That the Guideline Public Company Method Always Produces a Minority Value
• Valuing Underlying Assets Rather Than Stock or Partnership Interests
• Using Minority Interest Marketability Discount Data to Quantify Marketability Discounts for Controlling Interests
• Applying Discounts or Premiums to the Entire Capital Structure Rather Than Only to Equity
• Quantifying Discounts or Premiums Based on Past Court Cases