New case cites the oldest authority on BV

BVWireIssue #66-2
March 12, 2008

It’s what many consider the “bible” of the BV profession—Valuing a Business (VAB) by Shannon Pratt, who just released the updated 5th edition, with contributions by Alina Niculita.  Lest anyone doubt the staying power of this tome, first published in 1981, a new federal case calls VAB a “leading treatise,” citing its 4th edition for topics ranging from the selection of guideline public companies in the market approach to the application of marketability discounts to controlling interests.  At one point in Floorgraphics, Inc. v New American Marketing In-Store Services, Inc. (Feb. 5, 2008), the U.S. District Court (New Jersey) praises the expert for doing “precisely what Pratt instructs him to do” in the selection of company comparables, and qualifies his calculations of lost business value—along with his partner’s lost profits calculations—as both reliable and relevant under the applicable Daubert standards. 

The Floorgraphics case is the latest indication how the increasing and nearly rote frequency of Daubert challenges are turning into “mini trials” on the expert evidence.  This one examines the valuation analysis in depth, and an abstract appears in the next Business Valuation Update(April 2008).  But just in case you want to check the frequency of citations to Pratt’s authority (we count nine), we’ve posted a copy of the court’s opinion here. To obtain the latest edition of Valuing a Business (VAB5)—which evidently no BV professional should be without, click here.

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