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Dodgy Real Estate Valuation Compromises Dependent Business Valuation

Trial court did not err when it enforced shareholder agreement lacking purchase price and based buyout price on defense expert testimony; opposing expert committed “severe flaws in his methodology and the valuations based upon them,” appeals court says.

In re Appraisal of Dell Inc.

For statutory appraisal, Chancery says sales process related to management buyout “functioned imperfectly as a price discovery tool” and gives no weight to final merger price; court relies exclusively on DCF analysis to derive fair value of the company.

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.

Court refuses to take stand on minority discount in buyback of shares

The parties retained a sole appraiser, whom they both knew from past appraisals he had done of the company. Prior to formally engaging the appraiser, in a court hearing, both sides broached the issue of whether it was appropriate to apply a minority discount in valuing the plaintiff's shares. The court declined to weigh in on the subject, but told the parties the minority discount issue should form “part of the discussion” they needed to have over the valuation methodology.

Jafar v. Mohammed

In partnership dispute, appeals court affirms redemption award based on multiple-of-earnings valuation, finding valuation was reliable and admissible under state equivalent of Daubert and trial court had discretion to disregard other indicators of value.

NY fair value ruling deals blow to DLOM

The case featured experts whose professional backgrounds and valuation approaches could hardly be more dissimilar. Their value determinations were light-years apart. In trying to make sense of the conflicting testimony and achieve a plausible and fair result, the court decided it could not totally trust either valuation. Although it adopted the defense expert's valuation, it made two consequential changes to it. One was getting rid of the expert's admittedly high and insufficiently explained 35% discount for lack of marketability.

In re Discontinuance & Disposition of P.K. Smith Motors, Inc.

Trial court did not err when it enforced shareholder agreement lacking purchase price and based buyout price on defense expert testimony; opposing expert committed “severe flaws in his methodology and the valuations based upon them,” appeals court says.

New Jersey DLOM ruling inches ancient dissenting shareholder suit to conclusion

The parties' most recent fight focused on whether the prevailing expert's DCF analysis embedded a marketability discount to account for illiquidity. If not, the trial court had to decided what the appropriate DLOM rate was. The plaintiff-selling shareholder argued in favor of a zero DLOM, the defendants-buying shareholders presented an expert valuation that specified a 35% DLOM, based on the expert's use of a market approach.

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.

Lack of Marketability a Factor in Valuing Minority Interest

In buyout case, calculation of fair value of minority shareholder’s interest in restaurant turns on forensic accountant’s credit/cash ratio analysis; New York trial court says law recognizes lack of marketability as a factor in valuing closely held corpor ...

Expert’s Solid DCF and Industry Research Sway Court

Court discredits respondent expert’s capitalization of earnings calculation and market-based analysis, noting “severe deficiencies” and instead adopts petitioner expert’s valuation but applies DLOM to entire equity value, not just goodwill.

Cortes v. 3A N. Park Ave. Rest Corp.

In buyout case, calculation of fair value of minority shareholder’s interest in restaurant turns on forensic accountant’s credit/cash ratio analysis; New York trial court says law recognizes lack of marketability as a factor in valuing closely held corpor ...

Valuation Combines Elements of Rival Experts’ Cash Flow Analyses

Appeals court defers to trial court’s method of applying one expert’s cap rate to other expert’s cash flow analysis when valuing spouse’s interest in closely held company and says “purposeful” application of minority discount has support among valuators.

Court Relies on DCF to Derive Value of ‘Sui Generis’ Company

NY court rejects comparable analyses to value “truly incomparable” beverage company and relies solely on DCF; court says the fact that expressions of interest to buy the company never became bona fide offers indicates liquidity risk and supports 25% DLOM.

Multimillion-Dollar Personal Goodwill Allocation Leaves Court Stunned

Court says defendants were unjustly enriched when they allocated 40% of the price a competitor paid for assets of and to settle lawsuit with their company to personal goodwill where they also received compensation for consulting services and noncompetes.

Ferolito v. AriZona Beverages USA LLC

NY court rejects comparable analyses to value “truly incomparable” beverage company and relies solely on DCF; court says the fact that expressions of interest to buy the company never became bona fide offers indicates liquidity risk and supports 25% DLOM.

Potok v. Rebh

Court says defendants were unjustly enriched when they allocated 40% of the price a competitor paid for assets of and to settle lawsuit with their company to personal goodwill where they also received compensation for consulting services and noncompetes.

In Buyout, Court Extols Expert’s Valuation and Legal Acumen

Appeals court affirms trial court’s valuation of oppressed shareholder’s minority interest in family business based on credentialed appraiser’s “clear, thorough, professional, and reliable” opinion and knowledge of New York valuation-related law.

In Buyout, Court Extols Expert’s Valuation and Legal Acumen

Appeals court affirms trial court’s valuation of oppressed shareholder’s minority interest in family business based on credentialed appraiser’s “clear, thorough, professional, and reliable” opinion and knowledge of New York valuation-related law.

Browne v. Browne, Jr.

Appeals court defers to trial court’s method of applying one expert’s cap rate to other expert’s cash flow analysis when valuing spouse’s interest in closely held company and says “purposeful” application of minority discount has support among valuators.

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