News Tag: valuation methodology


Tax Court's Koons decision withstands appeal: DLOM ruling anchors valuation

The 11th Circuit recently affirmed a four-year-old Tax Court valuation of a revocable trust’s interest in a limited partnership. The linchpin in the valuation was the marketability discount. Read more >>

Merger valuation disclosures were adequate. Chancery applies business judgment rule to breach of fiduciary duty action

The business judgment rule has featured prominently in a number of recent breach of fiduciary duty cases in front of the Delaware Court of Chancery. Under the rule, the court must not interfere in a transaction if a majority of the minority shareholders approved the deal and the vote was “uncoerced and fully informed.” Read more >>

Trail income is different from personal goodwill, Tennessee court clarifies

Tennessee does not consider personal goodwill in a solo proprietorship a marital asset. But what about trail income, the money a financial planner makes from managing his or her clients’ funds and portfolios? In Fuller v. Fuller, the owner-spouse argued the goodwill analysis applied to the treatment of trail income as well. The Tennessee Court of Appeals recently disagreed. Read more >>

Chancery achieves fair value with three imperfect valuation techniques

The whole is greater than the sum of its parts. Perhaps Chancellor Bouchard thought of Aristotle when he recently ruled in a statutory appraisal action that, even though the results of three common valuation techniques were unreliable indicators of value, in combination they established fair value. Read more >>

5th Circuit backs district court's fair market value determination in ESOP dispute

The district court's determination of overpayment was a function of the contract price and the stock’s fair market value on each of three transaction dates. For its FMV determination, the court considered the testimony of three noted valuation experts retained by the plaintiffs, the DOL, and the defendants respectively. Different experts used different methods, different assumptions, different estimates, and they reached different conclusions. But they all used multiple approaches to produce several FMV estimates on the transaction dates. To arrive at a final value determination, or range of values, they all averaged or weighted the results. Read more >>

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 >>

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 >>

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 >>

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 >>

Destruction of financial evidence trips up guilty party's own experts

As a damages expert, what do you do when your own client has destroyed vital financial information? Two highly educated finance professionals working on a contract case solved this dilemma by relying exclusively on the opposing side's sales projections, only to see their analysis buckle under a Daubert challenge. Read more >>

Mississippi high court sets record straight on assessing economic damages

A Mississippi trial court’s cavalier approach to determining economic damages in a dispute involving allegations of breach of fiduciary duty and usurpation of a business opportunity triggered a petition with the state Supreme Court to clarify the applicable measure of damages. The trial court used the wrong standard and accounting procedures for calculating the loss to the plaintiff, the Supreme Court decided. Read more >>

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