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Wee v. Yangzhou Putian Shoemaking Co. (In re Unimex Corp.)

An expert’s report on debtor’s insolvency was excluded under Fed. R. Evid. 702 because the expert’s 50% discount of inventory value was a flawed assumption given that the debtor was not being liquidated and was not on its deathbed, but instead was a going concern.

Expert’s Testimony Is Excluded as to Solvency—Adjustments to the Balance Sheet of Debtor Were Inappropriate

An expert’s report on debtor’s insolvency was excluded under Fed. R. Evid. 702 because the expert’s 50% discount of inventory value was a flawed assumption given that the debtor was not being liquidated and was not on its deathbed, but instead was a going concern.

Determining Working Capital Adjustments Using a Bardahl Analysis

During a recent conference, the issue of adjusting for working capital came up and the audience seemed unfamiliar with the Bardahl analysis. Here is an excerpt from Gary Trugman’s Understanding Business Valuation, 6th edition, which gives some very practical advice on how to use this analysis.

Court has limited menu for steakhouse valuation

In a Michigan case, two 50% owners of a Ponderosa steakhouse were locked in a battle over the Old West-themed eatery, with both owners engaging in oppressive conduct against the other. They left it up to the court to decide their fate.

Bankruptcy Court Determines Fair Value Under Asset Approach With ‘Limited Evidence’ Available to It

This case involved a hotly contested battle over the fate of a Ponderosa restaurant in Michigan. The two owners, having had a falling out, pursued contentious litigation to wrest control of the restaurant from each other. Having no business valuation available to the court, the court was left with a real estate appraisal and limited evidence of assets and liabilities to determine the fair value of a 50% interest in the restaurant to be used in the buyout of one of the shareholders by the other shareholder.

Herremans v. Fedo (In re Herremans)

This case involved a hotly contested battle over the fate of a Ponderosa restaurant in Michigan. The two owners, having had a falling out, pursued contentious litigation to wrest control of the restaurant from each other. Having no business valuation available to the court, the court was left with a real estate appraisal and limited evidence of assets and liabilities to determine the fair value of a 50% interest in the restaurant to be used in the buyout of one of the shareholders by the other shareholder.

NFT Valuation: What You Need To Know

In 2021, nonfungible token (NFT) prices drastically increased and then dropped substantially just over year later. These digital assets can be difficult to grasp, but they now play a role in personal investment portfolios and on company balance sheets. As a result, valuations of digital assets will be needed for issues such as divorce litigation, estate valuations, bankruptcy litigation, fair value measurements, and more. This presentation will demystify these investments and teach attendees how the ...

VeroBlue Farms USA Inc. v. Wulf

In this complex case, which the district court judge called “a doozy,” the subject of this subissue was a motion by the defendants to exclude the testimony of the plaintiff’s (VeroBlue Farms USA Inc.) damages expert, Brandi Kleinman, CPA/CFF. The district court judge assigned the case to the court’s magistrate judge for recommendation of decision. The motion alleged a multitude of issues and flaws with the opinions of Kleinman. The magistrate, despite these alleged issues and flaws, denied the motion, thereby allowing Kleinman to testify.

U.S. District Court (Texas) Allows Testimony of Damages Expert Despite Alleged ‘Flawed Opinions’

In this complex case, which the district court judge called “a doozy,” the subject of this subissue was a motion by the defendants to exclude the testimony of the plaintiff’s (VeroBlue Farms USA Inc.) damages expert, Brandi Kleinman, CPA/CFF. The district court judge assigned the case to the court’s magistrate judge for recommendation of decision. The motion alleged a multitude of issues and flaws with the opinions of Kleinman. The magistrate, despite these alleged issues and flaws, denied the motion, thereby allowing Kleinman to testify.

BV News and Trends December 2022

A monthly roundup of key developments of interest to business valuation experts.

Jayawardena v. Daka

This case involved a shareholder dispute among four shareholders of a physician practice (Ferncreek Cardiology PA) and two real estate LLCs. There were buy-sell provisions for each of the three entities. As to Ferncreek, the buy-sell provision was essentially an increase in book value provision, as the regular account determined in “good faith.” Payment provisions were also included in the agreement. The two real estate LLCs had a buy-sell provision that provided for either a single agreed-upon appraiser or three appraisers if no agreement was made. The plaintiff made the decision to exit the practice, triggering the buy-sell provisions. The parties were not able to agree on certain provisions as they worked through the buy-sell agreements. The trial court entered partial summary judgments on some claims of both parties. This appeal dealt with these partial summary judgments and was filed by the plaintiff.

North Carolina Appeals Court Affirms Decisions on Value of Businesses Under Buy-Sell Agreements

This case involved a shareholder dispute among four shareholders of a physician practice (Ferncreek Cardiology PA) and two real estate LLCs. There were buy-sell provisions for each of the three entities. As to Ferncreek, the buy-sell provision was essentially an increase in book value provision, as the regular account determined in “good faith.” Payment provisions were also included in the agreement. The two real estate LLCs had a buy-sell provision that provided for either a single agreed-upon appraiser or three appraisers if no agreement was made. The plaintiff made the decision to exit the practice, triggering the buy-sell provisions. The parties were not able to agree on certain provisions as they worked through the buy-sell agreements. The trial court entered partial summary judgments on some claims of both parties. This appeal dealt with these partial summary judgments and was filed by the plaintiff.

RMA is the financial benchmarking data of choice, per BVR survey

Over three-quarters (78%) of valuation experts say they use RMA for financial benchmarking data, according to a recent survey by BVR. Coming in second is Bizminer, cited by 28% of respondents.

Bankruptcy court KOs transfers from ‘personal piggy bank’

In a bankruptcy case in Illinois, the three tests for insolvency came into play when a dispute arose as to whether transfers the debtor company made totaling $1.72 million were fraudulent.

The Dental Valuation Revolution

The valuation landscape for dental practices is changing rapidly. Private equity funds and dental service organizations have entered the industry in force. Experts Matthew Howard and Kam McQuay will engage in discussions around what is the definition of “any given buyer” for practices and how to include this relevant buyer in your valuations. They will also discuss industry-specific considerations for valuations concerning the officer compensation adjustment and typical and some not-so-typical income statement and balance ...

Stone v. Citizens Equity First Credit Union (In re Int’l Supply Co.)

The trustee of International Supply Company (ISCO) asked for avoidance and recovery of prepetition fraudulent transfers made to Citizens Equity First Credit Union. ISCO was insolvent when the transfers were made, and the transfers were for the benefit of the controlling shareholder. The court disallowed two of the fraudulent transfers. Some complaint counts against certain individuals were dismissed without prejudice.

Bankruptcy Court Sides With Trustee—Disallows (Fraudulent) Transfers

The trustee of International Supply Company (ISCO) asked for avoidance and recovery of prepetition fraudulent transfers made to Citizens Equity First Credit Union. ISCO was insolvent when the transfers were made, and the transfers were for the benefit of the controlling shareholder. The court disallowed two of the fraudulent transfers. Some complaint counts against certain individuals were dismissed without prejudice.

Appellate court KOs discount for trapped-in capital gains taxes

In a Louisiana case, a dissenting shareholder was withdrawing her shares in a company and the valuation of her interest was in dispute, so a trial was held.

In re Platinum Corral, LLC

The Bankruptcy Court turned down a plan and amended plan of reorganization primarily because only the debtor would benefit from the plan and creditors would be left with little or no return. The court ordered a new plan be delivered to the court as soon as possible because time was of the essence.

Plan of Reorganization Cannot Be Approved Because Essentially Only the Debtor Would Benefit

The Bankruptcy Court turned down a plan and amended plan of reorganization primarily because only the debtor would benefit from the plan and creditors would be left with little or no return. The court ordered a new plan be delivered to the court as soon as possible because time was of the essence.

ShopRite, Inc. v. Gardiner

In determining the fair value of a minority interest in stock sold back to the companies in a shareholder oppression assertion, the Louisiana Court of Appeals rejected a discount for trapped-in capital gains tax since the companies had no intention of selling the properties owned. The appeals court also disallowed a reduction in fair value related to the value of affiliated accounts receivable, noting that there was no evidence that the receivables were uncollectible.

Louisiana Court of Appeals Disallows a Discount for Trapped-In Capital Gains Taxes and a Reduction in Receivables for Collectability

In determining the fair value of a minority interest in stock sold back to the companies in a shareholder oppression assertion, the Louisiana Court of Appeals rejected a discount for trapped-in capital gains tax since the companies had no intention of selling the properties owned. The appeals court also disallowed a reduction in fair value related to the value of affiliated accounts receivable, noting that there was no evidence that the receivables were uncollectible.

Valuation experts spar over fraudulent transfer matter

In the bankruptcy court, two valuation experts squared off in a case where the trustee argued that a cash transfer by the debtor was a constructively fraudulent transfer under the bankruptcy code.

Yaquinto v. Thompson St. Capital Partners (In re Stone Panels, Inc.)

Trustee argued that a cash transfer by debtor was a constructively fraudulent transfer under the bankruptcy code. The Trustee was able to show that the transaction was an interest in property for which debtor did not receive reasonably equivalent value. The Trustee was not able to show that the debtor was insolvent at the date of the transfer or became insolvent as a result of the transfer. The debtor was engaged in a business for which the property remaining was sufficiently capitalized. It appeared that the debtor would have sufficient access to cash to service its obligations and operate its business in a sustainable way. The Trustee failed in its burden of proof.

Property Transfer Was Not Fraudulent Because Debtor Was Not Insolvent

Trustee argued that a cash transfer by debtor was a constructively fraudulent transfer under the bankruptcy code. The Trustee was able to show that the transaction was an interest in property for which debtor did not receive reasonably equivalent value. The Trustee was not able to show that the debtor was insolvent at the date of the transfer or became insolvent as a result of the transfer. The debtor was engaged in a business for which the property remaining was sufficiently capitalized. It appeared that the debtor would have sufficient access to cash to service its obligations and operate its business in a sustainable way. The Trustee failed in its burden of proof.

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