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Normalization Adjustments Survey
Background
1.
What are your top two areas of practice?
Shareholder Disputes
Divorce
Financial Reporting
Tax
M&A
Other
2.
Please identify the states in which you practice:
AL
MT
AK
NE
AZ
NV
AR
NH
CA
NJ
CO
NM
CT
NY
DE
NC
FL
ND
GA
OH
HI
OK
ID
OR
IL
PA
IN
RI
IA
SC
KS
SD
KY
TN
LA
TX
ME
UT
MD
VT
MA
VA
MI
WA
MN
WV
MS
WI
MO
WY
3.
How many personnel in your firm hold at least one of the following designations:
(please enter a number for all that apply)
ABV
ASA
AVA
CBA
CVA
MCBA
4.
How many engagements are you personally involved in annually
1-5
6-15
16-30
30+
5.
What percent of your engagements fit into the following revenue ranges:
Percentage
$0-$1M
-- Select an option --
0-25%
25-50%
50-75%
75-100%
$1M-$10M
-- Select an option --
0-25%
25-50%
50-75%
75-100%
$10M-$50M
-- Select an option --
0-25%
25-50%
50-75%
75-100%
$50M+
-- Select an option --
0-25%
25-50%
50-75%
75-100%
6.
Do you perform financial analysis (bench marketing) before or after you normalize?
Before
After
Both
Neither
7.
What percentage of your engagements have normalization adjustments that change the benefit stream used in the valuation by the following percentages?
For example, if the benefit stream before normalizations was $100 and the normalization adjustments increase the benefit stream used in the valuation calculation by $50; this would reflect a 50 percent change in benefit stream.
Percentage
Change in benefit stream is <10%
-- Select an option --
0-25%
25-50%
50-75%
75-100%
Change in benefit stream is 10-30%
-- Select an option --
0-25%
25-50%
50-75%
75-100%
Change in benefit stream is 30-60%
-- Select an option --
0-25%
25-50%
50-75%
75-100%
Change in benefit stream is 60-100%
-- Select an option --
0-25%
25-50%
50-75%
75-100%
Change in benefit stream is 100% +
-- Select an option --
0-25%
25-50%
50-75%
75-100%
I have no idea.
-- Select an option --
0-25%
25-50%
50-75%
75-100%
8.
Do you consider the impact of a compensation adjustment (or other-control based adjustments) on value, prior to making the adjustment?
On Average, Yes
On Average, No
Data Sources
9.
What data sources do you rely on for benchmarking?
BizMiner
Integra
Pratt’s Stats
Public Comps
RMA
Profitcents
Specialty Industry / Association Report
Other
10.
What data sources do you rely on for compensation benchmarking?
BizMiner
ERI
Integra
Payscale
Pratt’s Stats
Public Comps
Salary.Com
Specialty Industry / Association Report
Other
Types of Adjustments
11.
Do you adjust for non-recurring expenditures?
On Average, Yes
On Average, No
12.
What percentage of your engagements involve the following adjustments?
(please enter a number for all that apply)
Officers Compensation
Related Party Compensation
Perquisites
Meals and Entertainment
Rent
Transportation
Benefits
Non-Operating Assets on Balance Sheet
Non-Operating Income and Expenses
Personal Loans
Pension Liabilities
Environmental Hazard Liabilities
Signing Bonus
Fines, Fees, Settlements, Penalties
Inventory Method (FIFO vs. LIFO)
Collectability of Receivables
Depreciation – Book vs. Tax
Other
13.
If you selected "other" above, please specify:
14.
Do you use historical unadjusted or normalized capital expenditures, depreciation, and working capital?
Always Historical
Always Normalized
On Average, Historical
On Average, Normalized
15.
Do you use a normalized capital structure when calculating the cost of capital?
On Average, Yes
On Average, No
Control vs. Minority
16.
Do you use Mergerstat data as the primary support for control adjustments?
On Average, Yes
On Average, No
17.
Do you believe Mergerstat Data on average produces reasonable control discounts/premiums?
On Average, Yes
On Average, No
18.
Do you believe that the Mergerstat Data can actually overstate or understate the proper control premium/discount for a specific company?
On Average, Yes
On Average, No
19.
Do you make owner compensation adjustments in controlling interest valuations?
On Average, Yes
On Average, No
20.
Do you adjust non-owner employee compensation in controlling interest valuations?
On Average, Yes
On Average, No
21.
Do you make owner compensation adjustments in minority interest valuations?
On Average, Yes
On Average, No
22.
Do you adjust non-owner employee compensation in minority interest valuations?
On Average, Yes
On Average, No
23.
Do you consider an adjustment to owner’s compensation a normalization adjustment or a control adjustment?
Normalization Adjustment
Control Adjustment
24.
Which of the following techniques do you use when applying the income approach in a minority interest valuation:
apply DLOC to normalized control value
use actual minority cash flows to value interest
adjust expenses of independent owner and then adjust to the reasonable expectations of a minority interest holder
Commentary
25.
How do you distinguish between normalizing adjustments for a control value and those for a minority value?
26.
What is usually the most significant normalizing adjustment and how do you go about making it?
27.
Have you ever had any normalization adjustments disallowed (court, audit, etc.)? If so, please elaborate.
28.
What is the most common mistake you see people make relative to normalizing adjustments?
29.
When do you not consider normalization adjustments?
30.
Are there any divorce specific normalization adjustments in your area that you do not make for any other type of engagement?
31.
What is the strangest normalization adjustment you have made?
32.
How do you balance the cost/benefit aspect of normalization adjustments?
33.
What normalization adjustments are problematic for you?
34.
Would you be interested in specific training relative to this area?
Yes
No
35.
Please provide any additional commentary.
