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Highlights of 2020 Delaware Valuation Decisions

This article discusses two 2020 Supreme Court decisions and eight decisions by the Court of Chancery.

Unequivocal ‘no’ to unaffected market price—Delaware Supreme Court strikes down Aruba Networks

In a sharp rebuke, the Delaware Supreme Court recently overturned the Court of Chancery’s confounding decision in the Aruba Networks statutory appraisal case to use the unaffected market price as the sole indicator of fair value.

Appeals court upholds Lund buyout ruling and fair value determination

A protracted Minnesota buyout dispute involving the heirs to a local grocery store empire, Lunds & Byerlys, may have reached the end following a recent ruling from the state appeals court. The reviewing court upheld the trial court’s decision to grant the minority shareholder’s request for a buyout as well as the court's fair value determination.

Ongoing saga of New York’s out-of-step position on DLOM

We’ve followed the continuing tale of New York’s inconsistent position with respect to the discount for lack of marketability in fair value proceedings (for example, see this coverage).

Contentious Lund buyout and fair value rulings survive appeal

The Minnesota appeals court recently upheld the district court’s buyout order and fair value determination related to a well-known local grocery store chain, Lunds & Byerlys.

Paper says Delaware blundered in Dell and DFC Global

A paper analyzes what it calls “critical mistakes” in two Delaware Supreme Court decisions concerning appraisal rights.

Analysis of appraisal rights

An analysis that compares appraisal rights in the U.S., France, and Romania is in the University of Pennsylvania Journal of Business of Law.

Aruba Networks: Should Appraisals Rely on Unaffected Market Price?

Delaware appraisal decisions in recent years have effectively endorsed the concept that the price paid in an arm’s-length transaction is “fair value” when there has been a “robust” sales process. This article examines the “troubling” ruling in which the court based its appraisal solely on the unaffected market price.

Stale Fairness Opinions in Related Party Transactions Should Be Updated

It is common practice for proxy statements to contain fairness opinions that are dated weeks (or months) prior to the mailing date. Typically, they are not reviewed in the interim, which can be a problem.

Deal price vs. the DCF: Two new Delaware cases grapple with ‘transformed’ fair value landscape

With the landmark rulings in DFC Global and Dell, the Delaware Supreme Court has given its “full-throated endorsement” of market efficiencies by declaring the deal price (minus synergies) a strong indicator of statutory fair value, say two new statutory appraisal opinions from the Court of Chancery.

Delaware’s Unwarranted Assumption That Capex Should Equal Depreciation in a DCF Model

Delaware fair value proceedings have predominantly adopted the erroneous assumption that capital expenditures should equal the sum of depreciation and amortization in determining terminal value. Here’s an analysis of these flawed decisions.

Delaware Chancery explains logic behind use of market price in Aruba case

After the petitioners in a statutory appraisal action recently lost big, they undertook a multifaceted assault on the Delaware Court of Chancery’s decision to use the unaffected market price as the indicator of value. Their motion for reargument went nowhere.

Delaware Chancery defends use of market price, citing recent high court rulings

A few months ago, in a statutory appraisal case, the Delaware Court of Chancery made news when it used the unaffected market price as the indicator of fair value.

Appraisal rights in M&A

In a recent presentation by attorneys from Cadwalader, it’s clear that appraisal rights continue to be an important topic in the M&A world.

Appraisal rights in the U.S. and EU

In the U.S., there has been a surge of appraisal petitions and appraisal arbitrage, but this is not the case in the EU, according to a paper by Alexandros Seretakis (Trinity College, Dublin).

Briefing examines recent appraisal decisions

Since the Delaware Supreme Court issued its landmark Dell appraisal decision (see prior coverage), the Delaware courts have issued three appraisal decisions—Aruba, AOL, and SWS—which, unlike Dell, assigned no weight to the deal price in setting fair value below the deal price.

Court of Chancery disregards deal price where sales process is not ‘Dell compliant’

Recent rulings from the Delaware Supreme Court make it seem as if the discounted cash flow analysis has lost its top ranking among valuation methodologies in statutory appraisals involving publicly traded companies. Not exactly.

New paper examines statutory rights of appraisal in Delaware

“The Anna Karenina principle is alive and well in the Delaware courts,” according to a paper that explores statutory rights of appraisal and the search for the sometimes “elusive” concept of fair value.

Court of Chancery exalts stock price as most accurate indicator of fair value

The Delaware Court of Chancery recently had an opportunity to put into practice the directives the state’s high court had issued in DFC Global and Dell in terms of calculating fair value in a statutory appraisal proceeding.

Delaware Supreme Court balks at Court of Chancery’s Dell decision

Twice, in 2017, the Delaware Supreme Court struck down statutory appraisal rulings by the Delaware Court of Chancery that dismissed the importance of the market price.

‘Fanciful’ projections make DCF unreliable valuation tool in Delaware appraisal case

Management projections are the sine qua non of a discounted cash flow analysis, and, in a recent statutory appraisal action involving the pet product giant PetSmart, the Delaware Court of Chancery found they did not cut the mustard. The court called the projections, “at best, fanciful,” and concluded the most accurate measure of fair value was the merger consideration.

Tennessee dissenters claim Delaware block method is passé

The use of the Delaware block method in Tennessee recently came under attack in a case involving a closely held Nashville, Tenn.-based media company whose controlling shareholders had pursued a squeeze-out merger and later asked the trial court for a judicial appraisal of the dissenting shareholders' interest.

Chancery relies on income approach to determine fair value in problematic bank merger

In a statutory appraisal action, the Delaware Court of Chancery recently found the deal price did not reflect fair value because the sales process was suboptimal. Certain other methods the parties' experts used also were inadequate to the task, the court said.

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.

Delaware Supreme Court Judge Boos Chancery's Option Valuation Case Analysis

In reviewing one of the Delaware Court of Chancery's most noteworthy rulings from 2015, one judge on the state Supreme Court wrote a stinging critique of the trial court's analysis.

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