Laidler v. Hesco Bastion Environmental, Inc., 2014 Del. Ch. LEXIS 75 (May 12, 2014)
What to do in a statutory appraisal action when none of the more common valuation methods lead to a reliable fair value? In a recent case, the Delaware Court of Chancery faced just such a dilemma. The suit arose out of a private company’s short-form merger. Both the acquirer and acquiree operated in an unusual industry: producing flood barriers to prevent or mitigate the effects of natural disasters.
The court found that neither the merger price nor market analyses provided guidance. And since the company did not generate projections in the ordinary course of business, given its unpredictable sales, the discounted cash flow analysis also was not an option.
Instead, it adopted an “unfamiliar” methodology, the direct capitalization of cash flow (DCCF) analysis, which both parties’ experts used for their valuations.