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‘Real-World Market Evidence’ Does Not Support Dissenters’ Damages Claim, Chancery Says

Chancery says plaintiffs proved directors breached fiduciary duties and duty to disclose but failed to prove damages; court rejects plaintiff experts’ DCF analysis, noting problematic projections and beta; “real-world market evidence” shows company was not worth more than deal price.

In re PLX Tech. Stockholders Litig.

Chancery says plaintiffs proved directors breached fiduciary duties and duty to disclose but failed to prove damages; court rejects plaintiff expert's DCF analysis, noting problematic projections and beta; “real-world market evidence” shows company was not worth more than deal price.

Appeals Court Upholds Tax Court’s Section 1031 Decision Pivoting on ‘Tainted Appraisals’

Appeals court upholds Tax Court’s ruling that taxpayer’s transactions do not represent section 1031 like-kind exchanges because taxpayer never assumed ownership of replacement plants; improper input from taxpayer’s law firm tainted appraisals used to show otherwise; accuracy penalty is justified.

Exelon Corp. v. Commissioner

Appeals court upholds Tax Court’s ruling that taxpayer’s transactions do not represent section 1031 like-kind exchanges because taxpayer never assumed ownership of replacement plants; improper input from taxpayer’s law firm tainted appraisals used to show otherwise; accuracy penalty is justified.

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.

Tennessee no longer mandates Delaware block method to determine fair value

For the longest time, Tennessee case law required trial courts presiding over dissenting shareholder actions to determine fair value by using the Delaware block method. In a recent ruling, the Tennessee Supreme Court struck down the requirement and Tennessee has joined the jurisdictions that allow "more modern" valuation approaches.

A Method for Quantifying Contract Renewal Risk in Valuations

A formula that explicitly incorporates the assumed probability of renewal in the valuation of businesses that depend on contracts, licenses, or permits for their future cash flows; it builds on the Gordon growth model and the formula for the future value of a growing annuity.

BVU News and Trends September 2018

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

Tennessee embraces ‘modern’ valuation methods in fair value determination

In a key valuation decision, the Tennessee Supreme Court recently overruled precedent on how to determine fair value in a dissenting shareholder suit.

Mesirov v. Enbridge Energy Co.

In dispute over related-party transaction, court upholds aiding and abetting claim against financial advisor; plaintiffs produced enough facts to show fairness opinion ignored most relevant precedent transaction and other valuation metrics indicating the buyer was overpaying for contested asset.

Fairness Opinion Triggers Viable Aiding and Abetting Claim Against Financial Advisor

In dispute over related-party transaction, court upholds aiding and abetting claim against financial advisor; plaintiffs produced enough facts to show fairness opinion ignored most relevant precedent transaction and other valuation metrics indicating the buyer was overpaying for contested asset.

Test-drive a formula for quantifying the risk of contract renewal

When valuing a business that depends on contracts, licenses, or permits for its future cash flows, how do you take into account the risk of nonrenewal?

Flawed thinking re: capex and the DCF

An article in the current (August 2018) issue of Business Valuation Update examines what it calls the Delaware court’s erroneous default position in fair value proceedings that capital expenditures should equal depreciation in determining terminal value in a DCF analysis.

Expert’s Detailed Risk Analysis Bolsters Use of Deep Discount in Law Firm Valuation

In buyout dispute over law firm interest, court credits firm’s expert, noting his extensive relevant experience, his taking care to value interest under fair market value standard, as required by the partnership agreement, and his detailed risk analysis to support a deep discount.

Fredericks Peebles & Morgan LLP v. Assam

In buyout dispute over law firm interest, court credits firm’s expert, noting his extensive relevant experience, his taking care to value interest under fair market value standard, as required by the partnership agreement, and his detailed risk analysis to support a deep discount.

BVU News and Trends August 2018

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

In re Marriage of Preston

In divorce case, appellate court upholds valuation based on opinion of husband’s expert using MUM method to separate total goodwill value into personal and enterprise components; court also upholds use of small marketability discount where owner spouse is the sole owner of the company.

Court Favors MUM Method for Goodwill Allocation in Illinois Divorce Case

In divorce case, appellate court upholds valuation based on opinion of husband’s expert using MUM method to separate total goodwill value into personal and enterprise components; court also upholds use of small marketability discount where owner spouse is the sole owner of the company.

In re Appraisal Solera Holdings, Inc.

In an appraisal proceeding, the Chancery finds the deal price minus synergies provides the best evidence of fair value; court says there was an efficient market and the sales process, though not perfect, was able to deliver the value generated in an arm’s-length transaction.

Delaware Chancery Says Reasonably Sound Sales Process Delivered Fair Value

In an appraisal proceeding, the Chancery finds the deal price minus synergies provides the best evidence of fair value; court says there was an efficient market and the sales process, though not perfect, was able to deliver the value generated in an arm’s-length transaction.

Blueblade Capital Opportunities LLC v. Norcraft Cos.

Chancery rejects deal price as indicator of fair value, citing problematic sales process, and rejects use of unaffected trading price, citing company’s lack of trading history; court instead relies on its own DCF analysis, drawing on the most credible aspects of each expert’s analysis.

Flawed Sales Process Has Chancery Revert to DCF to Determine Fair Value

Chancery rejects deal price as indicator of fair value, citing problematic sales process, and rejects use of unaffected trading price, citing company’s lack of trading history; court instead relies on its own DCF analysis, drawing on the most credible aspects of each expert’s analysis.

Tips and Takeaways From the NYSSCPA BV Conference

BVU attended the annual business valuation conference of the New York State Society of CPAs (NYSSCPA) on May 21 in New York City. As usual, it was an excellent conference, and here are a few takeaways from the sessions.

How New QBI Deduction Impacts the Hypothetical Buyer and Seller, Part 2

Part 2 of a two-part article on the impact of the new tax law’s Qualified Business Income (QBI) deduction for pass-through entities in determining estimated after-tax cash flow at the investor level, as well as the related change in the fair market value of the entity.

BVU News and Trends July 2018

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

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