Appraiser gets top result for client by proposing an FMV “range”

A BVWire reader valued the damages from a breached contract for Bulgarian natural gas in a range between as low as $32 million to well over $100 million for a 100% interest. But, in this case, the expert had another weapon in his arsenal; a “due diligence” report prepared by the defendant’s own industry expert which claimed the value of the gas in the ground could be worth as much as $31.5 billion; even a 1% interest could return about $315 million.  Every valuation case should have a document like this available!

When asked to derive “the most likely figure” for the plaintiff’s 38% interest in the project, the plaintiff’s valuation expert gave an adept answer. Rather than specify a number, he indicated that the jury could consider “all of the evidence” and come to its own conclusion of FMV. Indeed, the jury returned a verdict of $66.5 million—or more than twice the value of the expert’s “cash flow” model, and far more than the $8.5 million that the defendant had agreed to pay for a 10% interest. The trial court reduced the award to $31 million, but on review, the appellate court reinstated the entire amount, finding it supported by sufficient evidence. In particular, the court commended the plaintiff’s valuation expert for “appropriately deferring to the jury, in its role as fact finder, to make its own assessment of fair market value.” Read the complete digest of Carlton Energy Group, LLC v. Phillips, 2012 Tex. App. LEXIS 1299 (Feb. 14, 2012) in the upcoming Business Valuation Update; the digest and court’s opinion are available at BVLaw.