News Tag: minority discount


New Tennessee law streamlines DLOM use in divorce valuation

When and whether to apply a discount for marketability in divorce valuations has been an open question in Tennessee, owing to some confusing court rulings. However, a recent amendment to the Tennessee Code seeks to provide clarity to valuators handling divorce cases in this jurisdiction. Read more >>

Ambiguous expert report prompts order to revalue minority interest

A recent Wisconsin case illustrates that a shareholder agreement in place is no guarantee for a smooth buyout of the minority shareholder. The case also includes a caution to experts to strive for clarity in their expert reports. Read more >>

New Jersey court applies DLOM in forced buyout: Defendant’s conduct created ‘extraordinary circumstance’

In adjudicating a New Jersey family dispute that escalated into an oppressed shareholder action, the trial court recently found the oppressing shareholder had created a situation that mandated the application of a discount for marketability (DLOM) in order to achieve a “fair and equitable” outcome. Read more >>

Latest methodology and practices for DLOM examined

A blue-ribbon panel of experts review the primary DLOM methods and reveal new survey data on which methods valuators rely on most. Read more >>

Chancery says bids in squeeze-out merger are not comparable

The Delaware Court of Chancery recently cut short a challenge to a going-private merger when it dismissed the plaintiffs' complaint. The plaintiffs unsuccessfully argued the defendants breached their fiduciary duties when they favored the controller's lower bid over a third-party bidder's higher offer. Read more >>

Challenge to new Section 2704 regulations is shaping up

The accounting, valuation, and legal professions are hard at work to defeat the Treasury Department's proposed Section 274 regulations. The new regs would curtail, if not entirely eliminate, valuation discounts in family-controlled entities. 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 >>

Chancery declines to meddle in parties' valuation agreement

In terms of valuation methodology, the agreement provided that “there shall be no minority or non-marketability discount applied.” Also, “fair market value” meant an arm’s length sale to an unrelated third party. And, for purposes of calculating the “total equity value,” the value of the assets would be subject to an EBITDA collar to ensure that the value of the assets was at least 6.5 x but no more than 7.5 x the company’s “EBITDA less Maintenance Capex” for year-end 2013. The resulting number was to be reduced by the company’s obligations and liabilities. Most important, the parties agreed to be bound by the appraiser's calculation of the price of the put units. There was no provision for judicial or any other form of review of the appraiser's valuation. Read more >>

Fair value calculation exposes gaps in court’s understanding of valuation

Poignant words from ‘Zelouf’ court on fair value appraisal and DLOM

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