The Use of Management Projections for Valuations

July 2011 978-1-935081-78-4 Softcover (116 pages)

BVR (editor)

Business Valuation Resources, LLC

Management forecasts and projections can be keys to determining a company’s value, but they are often unreliable or unrealistic. In Using Management Projections for Valuations, BVR delivers meaningful guidance on what steps to take in order to ensure as much accuracy as is possible when working with management reports – or dealing with the absence of these reports. Also included are summaries of recent court decisions in which a debate around projections was at the core of the dispute.
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Table of Contents

  • Introduction
  • It’s Hard to Predict, Especially about the Future
    By James Catty, MA, CA, CPA, CFA, CBV, CFE
  • Valuator’s Role in Assessing Management Projections
    By Teri Lombardi Yohn, Ph.D., B.Sc.
  • The Use of Forecasts and Projections by Valuation Specialists When Performing Services for Financial Reporting Purposes
    By Anthony V. Aaron, CFA, ASA
  • Management Projections, Always Suspicious, Now Receive Even More Review
  • Advice to Debtors—and Creditors—for Valuation Disputes in Bankruptcy Litigation
    By Daniel Perry & Alisa Schlesinger
  • Advanced Workshop on Management Forecasts and Projections
    Business Valuation Resources, May 5, 2011/10:00 a.m. PT
    Christine L. Baker, ParenteBeard LLC &
    Cynthia B. Rubin, Flemming Zulack Williamson Zauderer LLP
  • Abstracts of Court Cases Involving Management Projections .
  • Summary of Case Abstracts Sorted by State/Jusisdiction .
  • Albert Trostel & Sons Co. v. Notz .
    Discount rate, management projections, and more decide state FV appraisal action
  • American Classic Voyages Co. v. JP Morgan Chase Bank (In re American Classic Voyages Co.)
    Solvency valuation turns on reliability of pre-9/11 projections
  • Aukeman v. Aukeman .
    Which is more credible: an owner’s projections or those used for financing?
  • Bero Motors, Inc. v. General Motors Corporation .
    Lost profits award based on comparable dealerships and management projections affirmed
  • Cede & Co., et al. v. Technicolor, Inc. .
    Management’s projections figure heavily in dissenting shareholder action Crescent/Mach I Partnership v. Turner .
  • Del. Chancery’s preference for DCF turns on credible projections
  • In Re Cysive, Inc. Shareholders Litigation .
    Management’s projection deemed unreliable
  • Craig Alan Dunn v. Matrix Exhibits, Inc.
    Value of ownership interest based on pre-valuation date transaction and owner’s projections of future revenues
  • In re the Marriage of Dye .
    Experts in Indiana agree on DCF discount rate, projections at issue
  • In re Emerging Communications, Inc. Shareholders Litigation .
    Management projections and cost of capital considered
  • In re Global Technovations, Inc.
    Insolvency analysis hinges on reasonableness of projections
  • Gray v. Cytokine PharmaSciences, Inc.
    Experts rejected for conflict of interest and failure to use management projections
  • Insignia Systems, Inc. v. News America Marketing In-Store, Inc.
    After passing Daubert, lost profits expert may have won settlement for client
  • Maric Capital Master Fund, Ltd. v. Plato Learning, Inc.
    Merger prospectus criticized for misleading discount rate & management projections
  • Natural Balance Pet Foods, Inc. v. Chenango Pet Foods, Inc.
    Lost profits based on management projections
  • In re Nellson Nutraceutical .
    Experts left ‘in the dark’ by deliberately manipulated management projections
  • Parlour Enterprises Inc. v. The Kirin Group .
    Court outlines key factors in calculating lost profits for un-established business
  • Schooltz v. Schooltz .
    Lack of reliable evidence results in remand for value
  • In re Spansion .
    Mgmt. projections, DCF discount rate, & more are key to bankruptcy valuation
  • Structural Polymer Group, Ltd. v. Zoltek Corp.
    Managements’ projected lost profits calculations withstand appeal
  • Sun Insur. Marketing Network, Inc. v. AIG Life Insur. Co.
    Expert report stricken; lost profits projection too speculative
  • Susan Fixel, Inc. v. Rosenthal & Rosenthal, Inc. .
    Forecasts of future revenue, alone, insufficient to determine market value
  • Michael F. Taylor v. American Specialty Retailing Group, Inc. .
    Management projections given weight in DCF valuation
  • U.S. Salt, Inc. v. Broken Arrow, Inc.
    Are damages opinions based ‘almost exclusively’ on management opinions too unreliable?
  • Victory Records, Inc. v. Virgin Records America, Inc.
    Lessons from Daubert: verify client projections, comparables, & causation
  • In re Yellowstone Mountain Club, LLC
    Experienced bv expert manipulated by resort owner and attorneys?