Don’t discredit the DCF, says Trugman: Put the blame where it belongs

BVWireIssue #126-1
March 6, 2013

“Thank you for another article that points out the flaws in the testifying experts rather than the DCF methodology itself,” writes Gary Trugman (Trugman Valuation) about our item last week on the latest in a series of bankruptcy decisions favoring market or other “credible” evidence over an expert’s valuation. “I am rather disheartened at the fact that the courts are permitting experts to testify who are taking such poor positions that they not only lose in court, but more importantly, end up being written about in a manner that suggests the problem was with their methodology rather than their inputs.”

“The DCF is a well-established method, and in fact, is the most theoretically correct method to be used in establishing an indication of value,” Trugman adds. “Unfortunately, there are those experts who are using the methodology to further their clients’ interests regardless of the ethics of doing this. I only wish that these so-called ‘experts’ get what they have coming to them as a result of their actions.”

That said, he tells the BVWire, “I also wish that your slant on these court decisions would be placed where it belongs, and not allow your readers to think that the methodology is the problem. Judges would not criticize the method if it was being used ethically and in accordance with professional standards.” (Point taken, and much appreciated.)

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