William C. Dameworth, managing member and member in charge of valuation services, discusses the need for businesses appraisers to perform active passive analyses to assist legal counsel and the court in the jurisdiction-specific process of determining what part of separate property asset appreciation caused by the efforts of individuals might be divisible. Bill discusses helpful analytical steps to determine the increase in value caused by the active efforts by third party management, employees or owners versus the increase in value caused by the active efforts of the divorcing parties. He also discusses factors to consider when allocating appreciation between the third parties and the divorcing parties.
William C. Dameworth
Managing Member
William C. Dameworth is a managing member of Forensic Strategic Solutions and the member in charge of valuation services. A specialist in litigated business valuation, Mr. Dameworth’s extensive business valuation and litigation consulting experience includes services in over 500 engagements for a wide variety of purposes.
Active Efforts of Individuals in an Active Passive Analysis | William C. Dameworth
William C. Dameworth, managing member and member in charge of valuation services, discusses the need for businesses appraisers to perform active passive analyses to assist legal counsel and the court in the jurisdiction-specific process of determining what part of separate property asset appreciation caused by the efforts of individuals might be divisible. Bill discusses helpful […]
WATCH VIDEOMarket Forces in an Active Passive Analysis | William C. Dameworth
William C. Dameworth, managing member and member in charge of valuation services, focuses on market forces in an active passive analysis, and how business appraisers might approach market forces when performing an active passive analysis. Bill discusses the potential steps that can be taken to determine the increase in value caused by market forces versus […]
WATCH VIDEOCausation in an Active Passive Analysis | Bill Dameworth
William C. Dameworth, managing member and member in charge of valuation services, discusses various components of an active passive analysis, and the jurisdictional differences that can exist. In this video, Bill focuses on a common theme that runs throughout active passive analyses – causation. He also discusses the allocation of appreciation between the various factors […]
WATCH VIDEOTax Cuts and Jobs Act of 2017 Effects on Alimony Litigation | Kelly Schmid
Kelly Schmid, director of valuation services, examines how divorces executed after December 31, 2018 will be affected by the Tax Cuts and Jobs Act of 2017. Kelly discusses the numerous ways that the Act will affect how alimony is negotiated, as well its possible impact on prior divorce agreements, which should be revisited.
WATCH VIDEOTax Cuts and Jobs Act of 2017 Effects on Business Valuations | Kelly Schmid
Kelly Schmid, director of valuation services, explores how the Tax Cuts and Jobs Act of 2017 might affect businesses valuations. Kelly explains the importance of business appraisers proactively discussing with management the expected utilization of enhanced cash flows from tax savings. Kelly also discusses the need for business appraisers to consider using longer-term discounted cash […]
WATCH VIDEODepreciation & Capital Expenditures – Business Valuations | Kelly Schmid
Kelly Schmid, director of valuation services at Forensic Strategic Solutions, discusses the process of estimating depreciation expenses and capital expenditures in a cash flow forecast. She also examines how an incorrect estimate can impact a business valuation.
WATCH VIDEOWhat Are Capital Expenditures & How Do They Depreciate? | Kelly Schmid
Kelly Schmid, director of valuation services at Forensic Strategic Solutions, explains what capital expenditures are (also known as fixed assets). She also discusses the replacement and depreciation of capital expenditures, as well as the common misconception that depreciation and capital expenditures should always be equal in a normalized cash flow forecast.
WATCH VIDEOActive/Passive Appreciation in Divorce Litigation: Part Two | William C. Dameworth
WATCH VIDEOActive/Passive Appreciation in Divorce Litigation: Part One | William C. Dameworth
WATCH VIDEOBusiness Valuation for Private Companies | William C. Dameworth
Bill Dameworth, member in charge of valuation services at Forensic Strategic Solutions, discusses the differences between the valuation of privately-held and publicly-held companies and those focused on profit maximization versus tax minimization.
WATCH VIDEOCapital Expenditures, Depreciation and Amortization in a Cash Flow Forecast and the Impact of the New Tax Law | Kelly Schmid
The US Tax Cuts and Jobs Act (“TCJA”) passed by Congress on December 20, 2017, will impact forecasts of a company’s cash flow and thereby will likely impact the valuation of a company. One of the forecast elements impacted is the forecast of capital expenditures, depreciation and amortization. The lowering of the C Corporation income […]
READ FULL BLOGActive Passive Appreciation – Active Efforts of Individuals | William C. Dameworth
As discussed previously, once it has been determined that a separate business interest appreciated in value during a marriage, learned treatises and case law often delineate the active passive analysis into the following elements: Identifying and quantifying market forces that caused the separate property appreciation. Identifying and quantifying the separate property appreciation caused by the […]
READ FULL BLOGActive Passive Appreciation – Market Forces | William C. Dameworth
As discussed previously, once it has been determined that a separate business interest appreciated in value during a marriage, learned treatises and case law often delineate the active passive analysis into the following elements: Identifying and quantifying market forces that caused the separate property appreciation. Identifying and quantifying the separate property appreciation caused by the […]
READ FULL BLOGActive Passive Appreciation – Causation | William C. Dameworth
The business appraiser performing an active passive appreciation analysis looks to their engaging legal counsel to define and interpret state law in the particular jurisdiction. An active passive analysis is performed when state divorce law requires a determination of whether, and under what circumstances, appreciation in otherwise separate property is classified as a divisible marital […]
READ FULL BLOGWorking Capital Changes in a Free Cash Flow Forecast– Part III | Kelly Schmid
Part II of my working capital blog identified methods often used by business appraisers when forecasting working capital. In this installment, I will present some additional thoughts regarding this topic. Depending on the facts and circumstances, it is typically appropriate to consider the company’s historical working capital ratios and industry working capital metrics at the composite level (e.g. total working capital), as well as each separate component of working capital (e.g. accounts receivable, inventory, accounts payable, etc.).
READ FULL BLOGWorking Capital Changes in a Free Cash Flow Forecast– Part II | Kelly Schmid
Part I of my working capital related blog addressed the impact on free cash flow of changes in current assets and changes in current liabilities, which are the two components that comprise working capital (calculated as current assets minus current liabilities). The combined impact of changes in current assets and changes in current liabilities equals the impact of changes in working capital on free cash flow. Part II of this blog identifies methods often used by business appraisers when forecasting working capital.
READ FULL BLOGWorking Capital Changes in a Free Cash Flow Forecast – Part I | Kelly Schmid
In a business valuation income approach, the income stream being capitalized (in a capitalized income method) or discounted (in a discounted income method) is often the free cash flow generated by the entity being valued. Free cash flow is typically calculated on an after-tax basis, and represents the cash available to a company’s owners after […]
READ FULL BLOGCapital Expenditures, Depreciation and Amortization in a Cash Flow Forecast | Kelly Schmid
When valuing a private operating company, an appraiser is likely to use an income approach, either as the main valuation method or in conjunction with another method. Whether the appraiser capitalizes cash flows in a capitalized cash flow (“CCF”) model or uses forecasts of future cash flows in a discounted cash flow (“DCF”) model, they have incorporated both explicit and implicit assumptions into the cash flows used in their model.
READ FULL BLOGAnalyzing Assumptions in a Cash Flow Forecast | Kelly Schmid
Forecasts of future cash flows within the income approach to business valuation are loaded with assumptions. During my nearly two decades of business valuation experience, I have reviewed hundreds of valuation reports prepared by other experts that serve as a constant reminder that mathematical accuracy does not always equate to a reasonable value. I have seen erroneous assumptions made by business appraisers that range from illogical disconnects within the valuation to outright errors or unsubstantiated speculation.
READ FULL BLOGAdding the Value: Business Valuation Expertise in Divorce Litigation – Part Two | William C. Dameworth
In my last blog post, I explained what an active/passive appreciation study is, scenarios in which it would be conducted and the value that a business valuation expert brings to the table when performing the analysis. As a refresher, an active/passive appreciation study is often required in matrimonial litigation when an existing business or business interest is owned by one spouse prior to the marriage, or is gifted or bequeathed to one spouse during the marriage. Since we have covered the basics, we can now dive deeper and discuss the various phases and steps of an active/passive appreciation study.
READ FULL BLOGAdding the Value: Business Valuation Expertise in Divorce Litigation | William C. Dameworth
When going through a divorce, determining the marital value of private business interests can often get tricky – this is especially true if one spouse has a separate ownership interest in a business. An active/passive appreciation study is often required in matrimonial litigation when an existing business or business interest is owned by one spouse prior to the marriage, or is gifted or bequeathed to one spouse during the marriage.
READ FULL BLOGPre-divorce Business Downturn Syndrome | William C. Dameworth
Reflecting back on the performance of more than 1,000 business valuations over the last 20-plus years, I have observed the regular occurrence of an economic event in many divorce-related engagements that I have named the Pre-divorce Business Downturn Syndrome (“PBDS” for short).
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