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Court of Chancery Rules Unaffected Market Price Is Best Evidence of Fair Value

Court finds record shows unaffected market price is best evidence of fair value; court says company expert’s efficient market analysis and event study provide strong support for use of market price; court’s own DCF analysis generates value close to market price, thus corroborating market price.

New edition of Valuation and Common Sense by Fernandez

The 2019 edition of Valuation and Common Sense by Professor Pablo Fernandez (IESE Business School, University of Navarra) is now available—and it’s gratis.

Free download of an improvement to the Gordon growth model

One of the benefits of attending BV conferences in person is that you can also pick up some interesting things outside the formal sessions, such as during networking events, in the exhibit hall, or in the local watering hole after a long day.

Pablo Fernandez offers Valuation and Common Sense for free

Valuation and Common Sense (2019, 7th edition) ‘explains the nuances of different valuation methods and provides the reader with the tools for analyzing and valuing any business,’ Pablo Fernandez, professor of finance, IESE Business School, tells BVWire—UK.

Delaware Chancery Relies on Deal Proposal Valuation in Adjudicating Buyout Dispute

In buyout dispute, court says parties’ letter of intent states buyout conditions; court relies on amount stated in plaintiff’s debt/equity deal proposal to value subject company, finding parties’ trial experts used methods (DCF and asset accumulation) not suited to valuing subject company.

Hot-button issues presented at NYSSCPA BV conference

Cryptocurrency, financial projections, and inputs into the cost of capital were just a few of the important topics discussed at the annual business valuation conference of the New York State Society of CPAs (NYSSCPA) on May 20 in New York City.

D.C. Circuit Upholds Remainder-Interest Valuation in Weird Charitable Contribution Case

In charitable contribution case involving remainder interest, D.C. Circuit upholds Tax Court’s value-related findings, including that petitioner did not provide qualified appraisal and did not meet substantiation requirements; valuation here is to be based on FMV, not actuarial tables.

Blau v. Commissioner (RERI II)

In charitable contribution case involving remainder interest, D.C. Circuit upholds Tax Court’s value-related findings, including that petitioner did not provide qualified appraisal and did not meet substantiation requirements; valuation here is to be based on FMV, not actuarial tables.

ICAEW Practical Business Valuation programme begins again this week

ICAEW offers its two-day valuation basics course again beginning 9 May in London (the second day is 24 May).

Smith v. Promontory Financial Group, LLC

In buyout dispute, court says parties’ letter of intent states buyout conditions; court relies on amount stated in plaintiff’s debt/equity deal proposal to value subject company, finding parties’ trial experts used methods (DCF and asset accumulation) not suited to valuing subject company.

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.

Exciting times for UK business valuation

Writing for Business Valuation Update, Andrew Strickland (Scrutton Bland Chartered Accountants) notes that new techniques are now ‘sweeping away’ business valuation methodologies that have held sway for decades in the UK.

Verition Partners Master Fund Ltd. v. Aruba Networks, Inc. (Aruba III)

Delaware Supreme Court overturns Court of Chancery’s fair value determination based on unaffected market price and awards petitioners deal price minus synergies as determined by company; trial court’s analysis rested on “inapt” agency-costs theory and raised due process and fairness concerns.

Delaware Supreme Court Reproves Chancery’s Use of Unaffected Market Price in Aruba

Delaware Supreme Court overturns Court of Chancery’s fair value determination based on unaffected market price and awards petitioners deal price minus synergies as determined by company; trial court’s analysis rested on “inapt” agency-costs theory and raised due process and fairness concerns.

Brundle v. Wilmington Trust N.A. (III)

In key ESOP case, 4th Circuit affirms liability and damages findings against ESOP trustee; court says trustee’s reliance on ESOP appraiser’s contemporaneous valuation was not “reasonably justified”; district court used correct measure of damages and justifiable methodology, 4th Circuit finds.

4th Circuit Says Record Supports Liability and Damages Findings Against ESOP Trustee

In key ESOP case, 4th Circuit affirms liability and damages findings against ESOP trustee; court says trustee’s reliance on ESOP appraiser’s contemporaneous valuation was not “reasonably justified”; district court used correct measure of damages and justifiable methodology, 4th Circuit finds.

The Legend of Weighted Average Return on Assets and Benchmarking Purchase Price Allocation Data

The author's research shows that only current assets, non-competes, and customer relationships have any predictability to WACC in limited industries. In general, when intangibles have significance, their coefficients are negative, which reduces WACC and implied risk. This finding supports the claim by Lev and Gu (2008) that intangibles are important assets, which reduce, not increase risk. The concept that intangible always should have a premium above WACC is unfounded, and the premise of ARM 34 that intangibles are ancillary assets is outdated. The author suggests and alternative method to use purchase price allocation data to support the selection of premiums above WACC.

Kendall Hoyd & Silver v. Trussway Holdings

Delaware Court of Chancery finds DCF analysis is the best way to achieve fair value in a statutory appraisal case arising out of a contested merger; court’s analysis leans heavily on company expert’s analysis regarding contested inputs, including projections, beta, and terminal value.

Court Chooses DCF to Determine Fair Value in ‘Straightforward’ Appraisal Case

Delaware Court of Chancery finds DCF analysis is the best way to achieve fair value in a statutory appraisal case arising out of a contested merger; court’s analysis leans heavily on company expert’s analysis regarding contested inputs, including projections, beta, and terminal value.

Top 10 observations on the Tax Cuts and Jobs Act (TCJA) from the perspective of business valuation professionals

BVR caught up with practitioners at the most recent AICPA Forensic & Valuation Services (FVS) Conference to collect some thought-provoking observations on how the Tax Cuts and Jobs Act (TCJA) is impacting valuations. Practitioners are still grappling with understanding the new law’s many provisions, so this list is certainly not exhaustive, and the thinking will continue to evolve.

Starkly different valuation narratives in Vinoskey ESOP trial

Post-trial briefs in last year’s Acosta v. Vinoskey ESOP case reveal insights into how each side shaped the valuation narrative.

Current Observations on the Valuation Impact of the TCJA

Based on sessions at the 2018 AICPA Forensic & Valuation Services (FVS) Conference in Atlanta.

BVU News and Trends February 2019

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

Simplified MUM approach weathers attacks in Illinois divorce case

One of the key questions in an Illinois divorce case was how to allocate goodwill between enterprise and personal goodwill.

In Gatekeeper Role, Court Trains Attention on Expert Methodology, Not Conclusions

In ESOP case pivoting on valuation, court denies parties’ Daubert challenges; court notes “gatekeeping” means focusing “on principles and methodology, not the conclusions that [the experts] generate”; parties’ objections are mostly quarrels with opposing expert’s conclusions, court finds.

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