Are you a Thornhill expert?

BVWireIssue #84-4
September 30, 2009

Remember the controversial In re Marriage of Thornhill, in which a Colorado trial court accepted a 33% discount for lack of marketability for a controlling (70%) interest in a $1.7 million oil and gas operation? (See BVWire™ #72-2.)  On review, the appellate court confirmed the valuation—and rejected the wife’s argument that discounts should be precluded when valuing marital assets for divorce.

The wife appealed the decision, and last Tuesday the Colorado Supreme Court heard arguments on whether the fair value standard should apply in matrimonial cases, according to Ron Seigneur (Seigneur Gustafson LLP, Lakewood, CO). “The discussion was fascinating—a packed room,” he told attendees at the Chicago Divorce Summit. Despite the focus on fair value, the judges probed discounts in general and the magnitude of the one in this case. For example, did the wife have the opportunity to remarket her interest?  “She knew her options,” the attorney said, intimating that the wife could have sold to the other (30%) shareholder, who might have paid a premium to gain a controlling interest.

“My sense from the discussion is that the judges were persuaded that the trial court did not abuse its discretion to apply the fair market value standard, including discounts,” Seigneur said. If so, this may be problematic for local BV practitioners, because Colorado is a “value to the holder” state. In fact, Seigneur is currently fielding calls from attorneys asking whether he is a “Thornhill guy”—i.e., if the majority interests in their cases can merit a 33% discount, too. He’ll keep us posted on the court’s final decision, due in about 60 to 90 days, which is sure to “spillover into other jurisdictions.” The appellate decision is posted at BVLaw™, as is the case abstract.

More than one reason to attend the DLOM Summit. Keeping up with the current case law on marketability discounts is just one of many reasons to register for the 2nd Annual University of San Diego School of Law, Business Valuation and Tax Conference, coming up on October 9th. Other don’t-miss sessions include:

  • “How to Apply and Reconcile the Various Qualitative and Quantitative DLOM Models and Databases,” with panelists Bob Duffy, Jay Fishman, Linda Trugman, and Kevin Yeanoplos, moderated by Jim Hitchner;
  • An update on how to value complex financial assets and the Obama administration’s current proposals, by Boris J. Steffen; and
  • Nancy Fannon’s latest research on the “Effect of Shareholder Taxes on Value in the Private Capital Markets.”  Advanced notice on Nancy’s presentation: her conclusion is NOT what you think.
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