The Legal Intelligencer Blog

Business Valuation: The Management Interview

By Terry Silver 
Special to the Legal

At the appropriate stage in the business valuation process, an interview of company management is necessary, and required by business valuation standards. The interview should be scheduled at the point when the valuation analyst has received and analyzed sufficient company data to render the interview most meaningful, and should be conducted on the company premises.

The inception of the business valuation process involves the procurement of specific company documents such as financial statements, income tax returns, entity formation and governance documents, etc., referenced collectively as discovery. Once there has been adequate discovery production, the valuation analyst should record and trend relevant data, and become familiar with the company being valued and its specific industry. It is only after adequate preparation that the valuation analyst is ready to meet and interview company management and owners. I recommend having an additional person to record the responses of the interviewee, if possible.

In preparation for the management interview, the valuation analyst will usually begin with a questionnaire containing typical business valuation inquiries, after having made modifications relevant to the specific company being valued. When I create a questionnaire to conduct a management interview, I am mindful of whether the interviewee will be cooperative or combative, and structure and pose my questions accordingly. Even with a recalcitrant interviewee I usually achieve my desired results via:

•  An explanation of what I am doing and why.
•  Keeping my questions on point.
• Consistently maintaining a professional, but firm demeanor.
• Setting a realistic time span for the interview.
•  Being respectful of the interviewee and the time he/she is devoting to the process.
•  Not allowing myself to be deterred from the process.

As in any interview, my questions must be open-ended to solicit a full response. Questions that yield “yes” or “no” responses should generally be avoided. In my experience, questions that solicit responses that can lead to unscripted questions represent opportunities to gain important information. Scripted questions will yield valuable information, but being better prepared allows the valuation analyst to contemporaneously move off script. It is the new and additional follow-up questions that usually provide a deeper insight into the company, its industry, its management and its overall condition.

The questions posed should be meaningful for the process; making insignificant inquiries will lead to a breakdown in the interview. Questions not adequately answered must be asked again, either in the same form or restated. An interviewee who is disposed to be uncooperative will attempt to avoid making meaningful responses. In my experience, many interviewees will eventually respond to an interviewer using a very persistent approach.

The management interview for a business valuation begins as a science and maintains many scientific aspects, although the ability of an interviewer to be patient and react to ongoing events represents the art of the interview.

Terry Silver is a certified public accountant, certified valuation analyst and certified in financial forensics for Citrin Cooperman, an accounting, tax and business consulting firm in Philadelphia, where he is a partner with more than 33 years of experience as an accountant and auditor. He focuses his practice on business valuation and financial forensic services, expert testimony and matrimonial actions. He can be reached at [email protected] or 215-545-4800.

Fresh Ink: Inside Today's Legal and Pa. Law Weekly

Welcome to your Tuesday morning round-up of stories in today’s edition of The Legal Intelligencer, which also includes this week’s edition of Pennsylvania Law Weekly. All of the links below will take you directly to today’s stories, or you can head straight over to The Legal’s homepage. (Some stories may require registration or a paid subscription.)

The top story in today’s Legal is a look at labor and employment work, which is one of the few bright spots in an otherwise low-demand market for legal work. As reporter Gina Passarella writes, labor and employment work rose 4.7 percent in the second quarter and is one of the only practice areas that has been consistently positive in terms of demand over the last year-and-a-half.

Also above the fold on Page 1, reporter Saranac Hale Spencer writes that the Third Circuit has ruled an employment-test maker must share information with the Equal Employment Opportunity Commission in a dispute sprouting from a discrimination case in which Kroger’s used the company’s test in its hiring practices.

Below the fold on Page 1, reporter Zack Needles writes that an Allegheny County trial court has found that statements made by an assignor prior to an assignment of a mortgage are admissible under the party-opponent exception to the hearsay rule.

In more Regional News on Page 3, reporter Amaris Elliott-Engel writes that the Superior Court has granted en banc arguments over appellate rights.

As always, our People in the News section is on Page 2, and the top stories from our sibling publications across the country make up the Page 4 National News section.

In a Law Firm Management column on Page 5, Kristin Sudholz and Jennifer Smuts write about process improvement in a changing legal landscape.

In a Legal Marketing column on Page 7, Jamie Mulholland writes that there is no wiggle room when it comes to your personal touch in associating with clients.

Today’s lead story in PLW is the state Supreme Court mulling emotional distress coverage under an automobile insurance policy. As Zack Needles writes, the policy at issue provides coverage for “bodily injury to a person and sickness, disease or death which results from it.”

Below the fold on Page 1, reporter Ben Present writes that an attorney has challenged before the Supreme Court the removal from the bench of a magisterial district judge who missed court more than 100 times over two years.

On Page 3, Ben Present writes that lawyers debated the constitutionality of Megan’s Law at Supreme Court oral arguments last week.

There’s much more inside this week’s PLW, including Samuel C. Stretton’s Ethics Forum, in which he writes about the use of social media to discuss upcoming jury trials; Daniel E. Cummins’ Insurance Law column on Superior Court guidance regarding the Koken case; and Frank G. Murphy’s Civil Practice column on the interplay between arbitration clauses and superseding injunctive relief.

If you have questions or comments about any of today's stories, or our coverage as a whole, we invite you to e-mail any of the reporters directly. We hope you'll enjoy today's Legal.

Fresh Ink: Inside Today's Legal

Welcome to your Tuesday morning round-up of stories in today’s edition of The Legal Intelligencer, which also includes this week’s edition of Pennsylvania Law Weekly. All of the links below will take you directly to today’s stories, or you can head straight over to The Legal’s homepage. (Some stories may require registration or a paid subscription.)

There is also a supplement inside today’s paper covering Labor and Employment, so be sure to give that a look.

The top story in today’s Legal is the alleged victims taking center stage at the beginning of Jerry Sandusky’s trial. Reporter Ben Present is in Bellefonte, Pa., to deliver all the details.

Also above the fold on Page 1, reporter Saranac Hale Spencer writes that teenage terrorist Mohammed Khalid was before a federal judge Monday with a motion to be released from detention in order to enter a state-run juvenile facility in Loysville, Pa.

Below the fold on Page 1, reporter Gina Passarella writes that suspended state Supreme Court Justice Joan Orie Melvin has hired Scranton attorney Patrick A. Casey of Myers Brier & Kelly as her criminal defense.

In more Regional News on Page 3, Saranac Hale Spencer writes that the Third Circuit has mooted Lockheed Martin’s appeal over nuclear material.

As always, our People in the News section is on Page 2, and the top stories from our sibling publications across the country make up the Page 4 National News section.

In a Litigation column on Page 5, Denis James Lawler, Daphne Goldman and Mackenzie W. Smith write about the attorney-client privilege and ask if there is a fiduciary exception in Part II of a series.

In an Appellate Law column on Page 7, Howard J. Bashman writes that efficiency should be chosen over a prolonged deadlock in the state Supreme Court.

Today’s lead story in PLW is the state House of Representatives tabling a merit selection bill despite recent judicial scandals.

Below the fold on Page 1, Ben Present writes that to trigger the MCARE window, a defendant must know of an action.

On Page 3, Zack Needles writes that the Superior Court has said that “household” in insurance policies has two meanings.

There’s much more inside this week’s PLW, including Samuel C. Stretton’s Ethics Forum, in which he writes about balancing zealous advocacy with the duty of candor to the court; Matthew Weisberg’s Legal Profession column on causes of action emanating from legal malpractice; and Joel A. Rose’s Law Firm Management column on three proven short-term strategies to sustain and grow future profits.

If you have questions or comments about any of today's stories, or our coverage as a whole, we invite you to e-mail any of the reporters directly. We hope you'll enjoy today's Legal.

Fresh Ink: Inside Today's Legal

Welcome to your Friday morning round-up of stories in today’s edition of The Legal Intelligencer. All of the links below will take you directly to today’s stories, or you can head straight over to The Legal’s homepage. (Some stories may require registration or a paid subscription.)

The top story this morning is roughly 2,000 former professional football players filing a consolidated concussion complaint against the National Football League. As reporter Saranac Hale Spencer writes, the long-form complaint was filed in the multidistrict litigation suit in the U.S. District Court for the Eastern District of Pennsylvania, claiming the league is responsible for the debilitating health problems the athletes developed after getting concussions while playing football.

Also above the fold on Page 1, reporter Gina Passarella writes that Sovereign Bank has filed a malpractice claim against Stradley Ronon. The bank asked a federal judge to toss the law firm’s declaratory judgment action that was filed last month against the bank for “threats of malpractice.”

Below the fold on Page 1, Gina Passarella writes that the state Supreme Court has adopted new rules on e-discovery and is rejecting the federal model.

In more Regional News on Page 3, reporter Zack Needles writes that the Commonwealth Court has directed the state’s Office of Open Records to conduct in camera review of Governor Tom Corbett’s calendars that were redacted before being made public.

As always, our People in the News section is on Page 2, and the top stories from our sister publications across the country make up the Page 4 National News section.

In a Litigation column on Page 5, Larry E. Coben writes about when safety equipment is sold as an option.

In a Law Firm Management column on Page 7, J. Randolph Evans and Shari L. Klevens write that firms should protect themselves from the start with engagement letters.

If you have questions or comments about any of today's stories, or our coverage as a whole, we invite you to e-mail any of the reporters directly. We hope you'll enjoy today's Legal.

Fresh Ink: Inside Today's Legal

Welcome to your Tuesday morning round-up of stories in today’s edition of The Legal Intelligencer, which also includes this week’s edition of Pennsylvania Law Weekly. All of the links below will take you directly to today’s stories, or you can head straight over to The Legal’s homepage. (Some stories may require registration or a paid subscription.)

The top story in today’s Legal is Philadelphia District Attorney Seth Williams’ campaign committee inviting deputies and chiefs to a fundraiser last week. An email sent by the executive director of Friends of Seth Williams told recipients that they could attend the “Seth in the City” event despite any concerns they might have and “according to the ethics board, you can also make donations.”

Below the fold on Page 1, reporter Zack Needles writes a preview of the Act 13 arguments to be heard by an en banc Commonwealth Court panel tomorrow regarding the constitutionality of recent amendments to the zoning provisions of the state’s Oil and Gas Act.

Also below the fold on Page 1, reporter Ben Present writes that Jerry Sandusky’s accusers will be named in open court, as the judge presiding over the former Penn State assistant football coach’s case has ruled.

In more Regional News on Page 3, reporter Saranac Hale Spencer writes that a federal judge has ruled that Dell Financial Services is not a debt collector and is therefore not subject to the Fair Debt Collection Practices Act.

As always, our People in the News section is on Page 2, and the top stories from our sibling publications across the country make up the Page 4 National News section.

In a Business of Law column on Page 5, Frank Michael D’Amore asks if your firm will be the next Dewey & Leboeuf.

In an Insight on Diversity column on Page 7, Albert S. Dandridge III writes about what the Marine Corps can teach the legal profession about diversity.

Today’s lead story in PLW is the state Supreme Court settling statutory employer status in a workers’ compensation case.

Below the fold on Page 1, Zack Needles writes that the state Department of Education may only withhold funds for current claims.

On Page 3, Ben Present writes that the inclusion of a subcontractor’s bid doesn’t create a relationship with the general contractor.

There’s much more inside this week’s PLW, including Samuel C. Stretton’s Ethics Forum, in which he writes about disqualification because of knowledge of a conflict; Matthew T. Mangino’s Criminal Practice column, in which he writes that about the Supreme Court reining in the double jeopardy clause; and Sean Connolly’s State Government column, in which he writes that too many attorney general candidates make promises they can’t keep.

If you have questions or comments about any of today's stories, or our coverage as a whole, we invite you to e-mail any of the reporters directly. We hope you'll enjoy today's Legal.

Masque of the Red Dewey: Prestigious Firms Plagued by the Economic Shifts They Have Ignored

By Julia Claire Shapiro
Special to the Legal

The pink slip death began with the little people. The layoffs of lower-level associates, midsized firms shuttering, the rescinded offers, the law school debt, the lack of jobs. As the legal elite continued on with their party, the Reaper stood in the corner. A brief hush would fall over the room as he tapped the lesser nobility on the shoulder at regular intervals. Those who remained returned to their revelry. When he tapped Dewey on the shoulder, a murmur rippled through the room.

Some panicked, others rationalized. Above the Law has an entertaining survey of the blame game: lavish guarantees, lack of business, legal market crash and my personal favorite, the East Egg (the pedigreed prestigious pre-merger Dewey plagued by debt) v. West Egg (The scrappy and flashy pre-merger LeBouef that knew how to make green).

A growing segment of the legal industry is acknowledging that they are not immune, that strains of Dewey exist in their own firms. This is how I’m now invited to speak to the the same types of people who thought I was highly eccentric in 2009 when I began warning that the Reaper would come for BigLaw, too, and encouraged them to keep their workforces flexible with per diem attorneys and other flexible work arrangements.

Now, I’ve found that one slide makes law firm conference rooms pause. It contains two tales of horror: (1) Axiom Law’s recent growth — $1M in 2002, $80M in 2011 and on track to make $120M in 2012 and (2) the growing list of similar models that take the trained associates and increasingly Fortune 100 clients of AmLaw Top 50-200 firms. In return for lower legal bills, clients accept a software-based infrastructure and BigLaw alums sometimes working with them on site in place of high-rent offices. Pedigreed attorneys accept comfortable six-figure salaries and 40-hour workweeks in lieu of 80+ hour workweeks, higher salaries and partner potential.

After cross-examination from the room, there is another pause and you can see the silent reactions. “Is this death such a bad thing?” “This is an unfair attack on the belief system I have worshipped and sacrificed for my entire career!” “A mere alarmist, yawn.”

Alternative legal models are not likely to address all large clients’ needs, nor are they the face behind the Reaper’s masque. But their revenues make a statement. The legal climate is changing without the blessings of the legal elite. Even the firms once so sure in their stature and ability to survive the harshest conditions must evolve or die. Whether from client leverage to demand increasingly lower rates, or storied firms declaring bankruptcy under the weight of a dry legal market and lavish guaranteed compensation to partners, to businesses that quickly rotate through executives who are more persuaded by increased profits per share in the next quarter than relationships, the traditional law firm model is dead. And neither I, nor alternative legal models, killed it.

Julia Claire Shapiro co-founded Hire an Esquire, which enables law firms and legal departments to locate, manage and pay contract and per diem attorneys and local counsel with ease online. She also acts as a research analyst and subject matter expert for the legal service industry clients of a national consulting firm. In addition to practicing law and consulting, she has taught legal research and writing as an adjunct in Temple University Beasley School of Law’s International LL.M. Program.

Fresh Ink: Inside Today's Legal

Welcome to your Friday morning round-up of stories in today’s edition of The Legal Intelligencer. All of the links below will take you directly to today’s stories, or you can head straight over to The Legal’s homepage. (Some stories may require registration or a paid subscription.)

The top story this morning is lawyers making closing arguments in the Catholic Archdiocese of Philadelphia priest sex-abuse trial. As reporter Amaris Elliott-Engel writes, a prosecutor charged that Monsignor William J. Lynn lied to an investigating grand jury and on the stand. The trial is expected to go to jury today.

Also above the fold on Page 1, reporter Gina Passarella writes that Pepper Hamilton has continued its leadership changes by naming a new managing partner. Thomas J. Cole Jr. will be the new MP, effective Jan. 1, 2013, the firm announced Thursday.

Below the fold on Page 1, Amaris Elliott-Engel writes that a Philadelphia jury has awarded $4.2 million for a one-third ownership stake in a granite and marble company with disputed ownership.

In more Regional News on Page 3, Gina Passarella looks at how Pennsylvania firms fared in the Am Law 200 rankings released yesterday. Despite most of the five Pa.-based firms in the second hundred having increases in gross revenue, it was tough sledding to move up the list.

As always, our People in the News section is on Page 2, and the top stories from our sister publications across the country make up the Page 4 National News section, including the First Circuit ruling DOMA is unconstitutional.

In a Law Firm Management column on Page 5, Edwin B. Reeser writes about the economic benefits of three different types of lateral hires.

In an Intellectual Property column on Page 7, Lewis R. Clayton writes that trademark owners have gained leverage in keyword ad wars.

If you have questions or comments about any of today's stories, or our coverage as a whole, we invite you to e-mail any of the reporters directly. We hope you'll enjoy today's Legal.

Fresh Ink: Inside Today's Legal

Welcome to your Tuesday morning round-up of stories in today’s edition of The Legal Intelligencer, which also includes this week’s edition of Pennsylvania Law Weekly. All of the links below will take you directly to today’s stories, or you can head straight over to The Legal’s homepage. (Some stories may require registration or a paid subscription.)

Today's paper also includes the Women in the Profession supplement, so check out the whole thing, including videos of the roundtable discussion.

The top story in today’s Legal is reporter Gina Passarella’s look at multi-office lateral groups in the wake of Cozen O’Connor wooing nine intellectual property attorneys from four different Duane Morris offices. There can be logistical challenges in making moves like this, but the benefits can make up for it in the end.

Also above the fold on Page 1, reporters Ben Present and Zack Needles write that the Lackawanna County guardian ad litem has asked a federal judge to dismiss a lawsuit filed against her for allegedly threatening parents with sanctions if her recommendations were not followed. The guardian ad litem, Danielle Ross, claims she has judicial immunity. The county’s common pleas court was also named a defendant in the lawsuit, and earlier this month asked to be dismissed from the matter, asserting 11th Amendment immunity.

Below the fold on Page 1, Zack Needles writes about an Erie County judge’s siding with the defense in a slip-and-fall case, ruling that residents in snowy locales should expect icy hills.

Also below the fold on Page 1, reporter Amaris Elliott-Engel writes that the judge presiding over the Catholic Archdiocese of Philadelphia priest sex-abuse trial must decide whether to hear from additional accusers who claimed in 2010 that they were sexually abused by defrocked priest Edward Avery.

In more Regional News on Page 3, reporter Saranac Hale Spencer writes that an anti-fracking group has added defamation and conspiracy claims to its suit against a private surveillance company that the government allegedly hired to watch over it.

Also on Page 3, Saranac Hale Spencer writes that a Medicare contractor has claimed immunity before the U.S. Court of Appeals for the Third Circuit.

As always, our People in the News section is on Page 2, and the top stories from our sibling publications across the country make up the Page 4 National News section.

In a Legal Marketing column on Page 5, Stacy West Clark writes about time she has spent with multimillion-dollar rainmakers and some tips and observations she gained from it.

In a Cyberlaw column on Page 7, Jeffrey N. Rosenthal writes about online dispute resolution.

Today’s lead story in PLW is the Pennsylvania Superior Court granting a new trial to a Pennsylvania couple pursuing a bad-faith claim against their insurance carrier. As Ben Present writes, it shows that a consumer law violation may provide a path for proving bad faith.

Below the fold on Page 1, Amaris Elliott-Engel writes that the Pennsylvania custody law has changed for deployed soldiers.

On Page 3, Dan McCormick writes that cost of living adjustments are marital property, according to a Superior Court panel.

There’s much more inside this week’s PLW, including Samuel C. Stretton’s Ethics Forum, in which he says that clients’ notes subject to attorney-client privilege must be clearly marked as such; Matthew Weisberg’s Commentary on the legal profession in which he writes about when and how to seek a judge’s recusal; a billboard ban passing constitutional muster, according to a Delaware County judge; expert testimony is required in a dispute involving SEPTA and a supplier; and Joel A. Rose’s Law Firm Management column, in which he writes about proven strategies for effectively implementing the two-tier partner structure.

If you have questions or comments about any of today's stories, or our coverage as a whole, we invite you to e-mail any of the reporters directly. We hope you'll enjoy today's Legal.

Fresh Ink: Inside Today's Legal

Welcome to your Wednesday morning round-up of stories in today’s edition of The Legal Intelligencer. All of the links below will take you directly to today’s stories, or you can head straight over to The Legal’s homepage. (Some stories may require registration or a paid subscription.)

Today’s top story is career defense veteran James C. Haggerty is leaving insurance firm Swartz Campbell, along with Bucks County solo attorney Terry Goldberg, to join Philadelphia-based plaintiffs firm WSK Lawyers. As reporter Zack Needles writes, the firm plans to change its name to Haggerty Goldberg Schleifer & Kupersmith.

Also above the fold on Page 1, reporter Ben Present writes that a Philadelphia judge has granted partial summary judgment to a man who had his leg partially amputated above the knee after a 10-year-old ran him over with a 5-ton track loader. The child’s operation of the heavy-duty machinery came under the discretion of his father and was known by the vehicle’s rental company.

Below the fold on Page 1, Zack Needles writes that Cozen O’Connor is continuing its aggressive approach to hiring, announcing Tuesday that it has brought three Dewey & LeBoeuf attorneys into its Washington, D.C., and Harrisburg offices. On Monday the firm announced it had a hired a group of Duane Morris patent litigators.

In more Regional News on Page 3, reporter Amaris Elliott-Engel writes that Geoffrey R. Johnson is leaving Sprague & Sprague after 28 years to open his own practice. His last day at the firm was April 5.

Also on Page 3, the Barnes Foundation’s general counsel was found dead in his home at 47.

As always, our People in the News section is on Page 2, and the top stories from our sister publications across the country make up the Page 4 National News section.

In this week’s GC Mid-Atlantic column on Page 5, Hayes Hunt and Jonathan R. Cavalier write about an employer’s duty to report crimes by employees to the police, discussing a few hypothetical scenarios that might come up.

In a Law Firm Management column on Page 7, Edwin B. Reeser writes about undercapitalization and overdistribution and how they relate to large law firms and their value.

If you have questions or comments about any of today's stories, or our coverage as a whole, we invite you to email any of the reporters directly. We hope you'll enjoy today's Legal.

Fresh Ink: Inside Today's Legal

Welcome to your Thursday morning round-up of stories in today’s edition of The Legal Intelligencer. All of the links below will take you directly to today’s stories, or you can head straight over to The Legal’s homepage. (Some stories may require registration or a paid subscription.)

The top story on this packed news day is the 3rd U.S. Circuit Court of Appeals rejecting ERISA benefits for plaintiffs in a class action brought against electronics giant Siemens. As reporter Amaris Elliott-Engel writes, Judge Morton I. Greenberg, writing for a unanimous panel, said in Shaver v. Siemens Corp. that Siemens is entitled to summary judgment because it did not violate ERISA by not providing “permanent job separation” pension benefits if the plaintiffs’ employment terminated because of job movement, product line relocation or location closedown.

Also above the fold on Page 1, reporter Gina Passarella writes that a Philadelphia jury has awarded $12.88 million to a 50-year-old woman for injuries suffered following a thyroidectomy. The woman suffered catastrophic brain injuries and is now comatose after she was given drugs that caused vomiting after her surgery, resulting in bleeding in her neck that cut off her airway.

Below the fold on Page 1, Gina Passarella writes that Montgomery McCracken Walker & Rhoads is set to significantly expand its New York office with the acquisition of two smaller firms this month.

Also below the fold on Page 1, Amaris Elliott-Engel writes that Willie F. Singletary has submitted his resignation as a Philadelphia Traffic Court judge. Singletary was suspended without pay Jan. 5 for allegedly showing a photograph of his genitals to a Philadelphia Parking Authority contractor.

In more Regional News on Page 3, Gina Passarella writes that the state Supreme Court has reversed a ruling that would have transferred around $700 million to the state MCARE Fund to pay for abatements of doctors’ annual assessments.

As always, our People in the News section is on Page 2, and the top stories from our sister publications across the country make up the Page 4 National News section.

In a Law Firm Management column on Page 5, Joel A. Rose writes about how to approach a law firm merger or acquisition, including a checklist of important things to keep in mind.

As it is Thursday, this week’s Young Lawyer column is on Page 7, as Harris A. Dainoff writes five tips for making the adjustment from law student to lawyer, focusing heavily on the importance of communication skills.

If you have questions or comments about any of today's stories, or our coverage as a whole, we invite you to e-mail any of the reporters directly. We hope you'll enjoy today's Legal.