Business Valuation Update
- How to Review a Report’s Valuation Methodology
- Ideas for Solving Two Problems in the BV Profession
- How Do Your Firm’s Benefits Stack Up?
- Using Rule of Thumb Data to Uncover Cooked Books
Accounting Method Trumps Valuation in ‘Clear Reflection of Income’ Case
Taxpayer’s fair market valuation of account receivables must “clearly reflect income” under accounting requirements of IRC §446(b).
Court Reverses $190 Million Damages Award, Finding Faulty Valuation ‘Yardstick’
Court vacates $190 million lost profits/lost enterprise value award based on flawed comparables and financial analysis.
Tax Court Rejects Tax Affecting, CSRP, Poor Comps, and More
Tax Court dismisses guideline company comparable method in this case for lack of true comparables and rejects experts’ DCF for tax affecting and other adjustments without sufficient justification or support.
Valuing Two Tough Aspects of Damages: Pricing and Discount Rate
Bankruptcy court finds that the discount rate related to a contract damages claim should incorporate the risk factors present at the time of contract execution, making risk-free rate inappropriate.
‘Hybrid’ Approach to Quantify Loss of Beer Franchise Contracts
Court uses hybrid approach to quantify diminished value in business resulting from franchisees’ loss of beer brands; it means determining FMV of franchise contracts by way of DCF and adding loss in value of other assets directly related to loss of brands.
Special Legal Report: Important Delaware Chancery Case on Terminal Growth Rate, ERP, Betas, and Best Experts
Delaware Chancery adopts supply-side equity risk premium and discusses appropriate terminal growth rate, tax rate, and beta in the statutory fair value appraisal of Russian telecomm company.
Calculating Damages for Stealing ‘Early Stage’ IP Helped by Competitor’s Actual Pricing Data
Court denies summary judgment motion, finding sufficient damages evidence for misappropriation of trade secrets—even for early-stage technology—based on the actual pricing data by the competitor, which valued the risk at various stages of development.
Competing Valuations of Trump Casinos Determine Fate, Feasibility of Restructuring
Bankruptcy court considers key valuation evidence—including total enterprise value, cost of debt, debt service capacity, and capex/EBITDA proections—in confirmation of reorganization plan for Trump casinos.
IRS Strains to Prove Goodwill in Like-Kind Exchange
In tax refund case related to tax code’s like-kind exchange provisions, Court of Claims rejects a bright line rule that radio stations cannot have goodwill; it also finds that the discounted cash flow (DCF) method the government’s expert chose to determin ...
Taxpayer Victory on FLP Recognition
On Jan. 18, 2000, Judge Orlando Garcia of the United States District Court ruled in favor of the taxpayer in the first family limited partnership case to be tried in a federal district court.
Billion-Dollar Transfer Pricing Case Turns on Testimony of ‘Incredible’ IRS Experts
IRS loses billion-dollar transfer pricing case based on expert’s wrong determinations of cost of capital and more.
Taxpayer Scores Partial Success in Cal. Hotel Property Tax Suit
Appeals court says assessor’s version of income approach to determine hotel property taxes violates law because it does not identify, value, and exclude certain intangible assets; but management fee deduction largely captures hotel’s goodwill.
Court Rejects Inadequate DCF; Selection of Comparables Critical 30% Lack of Marketability Discount for Controlling Interest
The issue in this estate tax case was the fair market value of decedent's 1,499 shares of Peoples Trust and Savings Bank of Boonville, Ind., constituting 49.97% of the 3,000 shares outstanding.
Discount Rate, Management Projections, and More Decide State Fair Value Appraisal Action
Statutory fair value appraisal of automotive company turns on DCF inputs, including discount rate and management projections, plus one expert’s better industry experience and analysis.
Delaware Chancery Rejects DCF Analysis in Insurance Company Appraisal
Delaware Chancery Court favors “shared synergies” and actuarial analysis in the fair value appraisal of an insurance conglomerate’s merger.
Use of Asset-Level Deductions Hinges on Business Strategy
State’s high court strikes down district court’s fair value determination, finding reliance on prior law prohibiting use of deductions was misguided where company pursued strategy of selling off real estate and other assets at time of triggering event.
Lack of Cash Flow Projections Compels Use of DCCF
In statutory appraisal action, Chancery agrees with experts that lack of management cash flow projections precludes use of DCF analysis, and adopts DCCF method resolving valuation disputes related to experts’ inputs and calculations.
Expert’s Unconventional Method to Forecast Lost Profits Satisfies Daubert
Federal district court finds plaintiff’s expert’s Crystal Ball and Holt Winters methodology to project lost profits admissible under Daubert; method proved reasonable when subsequently tested with regression analysis tool.
Contract Damages: Accounting for Post-Breach Market Conditions
Court of Appeals affirms $36.3 million lost profits for real estate development, finding that evidence of post-breach market deterioration was not relevant and permitting recovery for collateral damages, even though re-sale contracts did not exist for the ...
Valuing Director Guaranties in Bankruptcy: Using a Put Option Approach
Bankruptcy court confirms reorganization plan based in large part on “put option” approach to valuing corporate insider guaranties.
With Expert Help, N.Y. Court Computes Deli’s Fair Value
New York court enlists expert valuators to determine the fair value of a deli, occupying a “unique niche,” following the death of one of two equal owners; the court adopts the defendant expert’s income approach, but rejects the proposed 20% lack of market ...
Litman a New Landmark Among Cases Considering Restricted Stock Discounts
Federal Court of Claims prefers option-pricing models to quantify marketability discounts for large block of restricted internet stock.
Bankruptcy Court Accepts Rationale for Tax Affecting
In a fraudulent transfer case involving S corp, court says valuation should reflect that buyers of S corps would experience a reduction in the value of the corporations' earnings because of the need to pay personal income taxes on those earnings.
Tax Court Accords Superpremium to Small Voting Block and Allows Deduction of 100% of Trapped-In Capital Gains Tax
Chris Mercer, president of Mercer Capital Management Inc., a leading independent business appraisal firm, abstracts and analyzes what is sure to be one of the most discussed U.S. Tax Court of 1999.
Teams of Experts Help Court and Creditors Value Huge, Bankrupt Homebuilder
Bankruptcy court voids over $600 million in transfers to subsidiaries of bankrupt homebuilders based on teams of expert testimony regarding solvency opinions and lack of reasonably equivalent value.