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Court admits expert's anti-'Georgia-Pacific' royalty calculation

There is no absolute requirement to develop a reasonable royalty based on the Georgia-Pacific framework. That's the takeaway from a Daubert ruling in which the court denied the defendant's motion to preclude the testimony of the opposing damages expert, who determined a reasonable royalty based on market data instead of the customary Georgia-Pacific factors. Read more >>

Healthy outlook for healtchare ASC acquisitions

The ambulatory surgery center (ASC) field will be very active this year with new transactions and partnerships, according to the “2016 ASC Valuation Survey” from HealthCare Appraisers Inc. Almost 90% of survey respondents say they plan to purchase an ASC this year, and 22% of those say they’ll acquire between six and 10 ASCs. Read more >>

Wholesale exclusion of expert testimony contravenes Daubert, 2nd Circuit says

One error in an extensive economic analysis does not automatically call into question the entire expert opinion, the 2nd Circuit Court of Appeals recently said in the context of a securities fraud lawsuit involving the drug giant Pfizer. With this pronouncement the appeals court resuscitated a class action that had died after the district court excluded the plaintiffs' loss causation and damages expert under Daubert based on errors in the expert's event study. Deprived of the testimony, the plaintiffs were unable to prove two critical elements of their claim. Read more >>

Why Bankruptcy Court declines to be bound by divorce valuation

Following the divorce, the husband filed for Chapter 13 bankruptcy and asked for confirmation of his plan. The issue was whether the plan could meet the liquidation test applicable under the Bankruptcy Code’s section 1325(a)(4). In essence, the test requires that creditors in a Chapter 13 bankruptcy receive present value payments that are at least equal to the amount the creditors would receive in a Chapter 7 case. Read more >>

Arkansas Supreme Court reverses itself on active appreciation in divorce

Under Arkansas statutory law, the increase in the value of nonmarital property is nonmarital property. But in a line of decisions going back nearly 30 years, the Arkansas Supreme Court created an exception to the statutory rule by way of the active appreciation doctrine, which says that if the growth in value is the result of the owner spouse's efforts, the increase in value is subject to marital distribution. Read more >>

Court refuses to take stand on minority discount in buyback of shares

The parties retained a sole appraiser, whom they both knew from past appraisals he had done of the company. Prior to formally engaging the appraiser, in a court hearing, both sides broached the issue of whether it was appropriate to apply a minority discount in valuing the plaintiff's shares. The court declined to weigh in on the subject, but told the parties the minority discount issue should form “part of the discussion” they needed to have over the valuation methodology. Read more >>

Florida court resists call for bright-line rule on active-passive appreciation

In this age of entrepreneurship, valuators working on divorce cases often run into the issue of active and passive appreciation. But this issue not only comes up in the context of one spouse's ownership of a business that qualifies as separate property, as a recent Florida appeals court ruling shows. The case involved the husband's separate ownership of stock in a company for which he worked and the stock's substantial appreciation in value during the marriage. The wife asked for a rule "that all appreciation of the stock of a company for which a spouse works is a marital asset." Read more >>

Call for data to test new average-strike put option DLOM model

John Finnerty (Alix Partners) has developed a new version of his average-strike put option DLOM model that can be generalized to accommodate a restriction period of any particular fixed length. He presented the new model during a BVR webinar and asked the audience for comments and suggestions. He would also like some real data for testing purposes. Read more >>

NY fair value ruling deals blow to DLOM

The case featured experts whose professional backgrounds and valuation approaches could hardly be more dissimilar. Their value determinations were light-years apart. In trying to make sense of the conflicting testimony and achieve a plausible and fair result, the court decided it could not totally trust either valuation. Although it adopted the defense expert's valuation, it made two consequential changes to it. One was getting rid of the expert's admittedly high and insufficiently explained 35% discount for lack of marketability. Read more >>

Industry-specific empirical support for passive appreciation

A survey is open for respondents to indicate which industries they would like to see analyzed for economic causal factors and their elasticities in order to better determine passive appreciation in business assets in a divorce context. The resulting analyses will be published. Read more >>

Goodwill-noncompete connection trips up buyer of medical practice

Ultimately, the parties reached a deal that included the sale of the building and the sale of the assets of the practice, as well as an employment contract for the doctor. The asset purchase agreement said the assets being sold included all of the practice's goodwill. At the same time, it allocated 100 percent of the purchase price to tangible assets: furniture, fixtures, equipment and supplies. The agreement also included noncompete and non-solicitation clauses. Read more >>

BV profession needs "one clear voice" in New York DLOM matter

A prior post that highlighted the article “NY’s Unfair Application of Shareholder-Level Marketability Discounts,” written by Gil Matthews and Michelle Patterson (both with Sutter Securities) has sparked calls for the BV profession to speak with “one clear voice” on this issue. Read more >>

Additional Valuation Information Worthless? Delaware Chancery Thinks so

Asked to probe the value of the disclosures and by extension the fairness of the settlement to the absent class members, the Chancellor used the occasion to detail the problems related to disclosure settlements. He noted the Chancery’s historical practice of approving such settlements, even though they frequently were of marginal value to the plaintiffs. He considered this past attitude of the court one of the causes for the explosion of deal litigation “beyond the realm of reason." Read more >>

Call for change in New York’s DLOM stance gains steam

A "new note" in the hotly debated NY DLOM issue was sounded in an article in the January issue of Business Valuation Update. In the article, “NY’s Unfair Application of Shareholder-Level Marketability Discounts,” Gil Matthews and Michelle Patterson (both with Sutter Securities) write that New York “stands alone in that it favors (and some lower courts believe requires) the imposition of a marketability discount on dissenting shareholders in fair value determinations. There is broad consensus that DLOMs should seldom, if ever, be permitted in appraisal or oppression cases.” Read more >>

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