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In a crunch, court adopts company’s DCF model as fair value indicator

In a statutory appraisal action prompted by the 2016 buyout of minority shareholders by the controller of a private company, the Delaware Court of Chancery recently found there was no meaningful market-based evidence of fair value and neither expert opinion, based on standard valuation methods, was “wholly reliable.”

Kruse v. Synapse Wireless, Inc.

In appraisal action arising out of controller’s buyout of minority stockholders, court finds there is no reliable market evidence as to target’s fair value on merger date; none of expert valuations are “wholly reliable,” but one expert’s DCF analysis offers a “proportionately reliable conclusion.”

Lacking Any Wholly Reliable Indicators of Fair Value, Court Adopts Respondent's DCF Model

In appraisal action arising out of controller's buyout of minority stockholders, court finds there is no reliable market evidence as to target's fair value on merger date; none of expert valuations are "wholly reliable," but one expert's DCF analysis offers a "proportionately reliable conclusion."

Fir Tree Value Master Fund v. Jarden Corp., (Jarden III)

High court affirms trial court’s use of unaffected market price as fair value in statutory appraisal involving merger of publicly traded company; high court rejects petitioners’ late argument that, where sale process was flawed and company failed to prove synergies, deal price should act as floor.

No ‘Long-Recognized Principle’ Against Use of Market Price as Fair Value Indicator, High Court Says

High court affirms trial court’s use of unaffected market price as fair value in statutory appraisal involving merger of publicly traded company; high court rejects petitioners’ late argument that, where sale process was flawed and company failed to prove synergies, deal price should act as floor.

Bankruptcy Court Calls Choice of Comparables ‘Key Value Driver’ in Expert Valuations

Ruling on plan confirmation, Bankruptcy Court finds debtor expert’s determination of total enterprise value of reorganized debtor more credible than committee for unsecured creditors’ expert; in adopting debtor expert’s comparable company analysis, court calls choice of comparables set a “key value driver.”

In re Emerge Energy Services LP

Ruling on plan confirmation, Bankruptcy Court finds debtor expert’s determination of total enterprise value of reorganized debtor more credible than unsecured creditors’ expert; in adopting debtor expert’s comparable company analysis, court calls choice of comparables set a “key value driver.”

Court Says Corrected DCF Still Supports Original Fair Value Determination

Responding to petitioners’ motion for reargument, court concedes and corrects errors in court’s original DCF analysis but finds corrected DCF model still corroborates the original fair value determination; court affirms its reliance on unaffected market price as fair value indicator.

In re Appraisal of Jarden Corp. (II)

Responding to petitioners’ motion for reargument, court concedes and corrects errors in court’s original DCF analysis but finds corrected DCF model still corroborates the original fair value determination; court affirms its reliance on unaffected market price as fair value indicator.

Court of Chancery favors unaffected market price over other fair value indicators (Part 2)

When the Delaware Court of Chancery recently decided to rely on the unaffected market price for fair value, in a major statutory appraisal case, it provided an in-depth critique of the experts’ traditional valuation analyses, which valuators want to be familiar with.

Court of Chancery favors unaffected market price over other fair value indicators (Part 1)

In a freshly minted ruling, the Delaware Court of Chancery said the unaffected market price was the most reliable indicator of fair value in a big statutory fair value case.

In re Appraisal of Jarden Corp. (I)

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.

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.

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.

High Court Finds Chancery’s Weighting of Values Unexplained and Inexplicable

State Supreme Court declines to create presumption for appraisal actions that deal price is best indicator of value when merger was arm’s-length transaction, but court finds Chancery’s valuation approach lacked support in record and requires revaluation.

Tax Court Favors IRS’s Cost Markup Analysis to Compute Management Fee

In a suit over fees paid by taxpayers’ operating companies to taxpayer-controlled management company, Tax Court says IRS expert’s cost markup analysis produces most credible arm’s-length management fee; this fee represents the allowable deduction amount.

Wycoff v. Commissioner

In a suit over fees paid by taxpayers’ operating companies to taxpayer-controlled management company, Tax Court says IRS expert’s cost markup analysis produces most credible arm’s-length management fee; this fee represents the allowable deduction amount.

High Court Finds Chancery’s Weighting of Values Unexplained and Inexplicable

State Supreme Court declines to create presumption for appraisal actions that deal price is best indicator of value when merger was arm’s-length transaction, but court finds Chancery’s valuation approach lacked support in record and requires revaluation.

DFC Global Corp. v. Muirfield Value Partners, L.P. (II)

State Supreme Court declines to create presumption for appraisal actions that deal price is best indicator of value when merger was arm’s-length transaction, but court finds Chancery’s valuation approach lacked support in record and requires revaluation.

Market Data Approach ‘Particularly Unsuitable’ to Valuing Feature Film

Court rejects expert’s movie valuation based on percentage of cost of making it; market data approach is “particularly unsuitable” because simply averaging price of films and cost to create them does not yield information about value of particular film.

Holder v. Howe

Court rejects expert’s movie valuation based on percentage of cost of making it; market data approach is “particularly unsuitable” because simply averaging price of films and cost to create them does not yield information about value of particular film.

Market Data Approach ‘Particularly Unsuitable’ to Valuing Feature Film

Court rejects expert’s movie valuation based on percentage of cost of making it; market data approach is “particularly unsuitable” because simply averaging price of films and cost to create them does not yield information about value of particular film.

Court Snubs Lost Earnings Analysis Based on ‘Incomplete Use’ of Data

Court rejects expert’s loss of business opportunity and lost earnings calculations, finding capitalization of earnings method is inappropriate for valuing company with unstable earnings and lost salary projections are based on “incomplete use” of data.

Expert’s Poor Grasp of Valuation Issues Undercuts Shareholder Suit

Appeals court affirms soundness of going private merger; court says plaintiffs failed to point to better offer and their expert lacked formal accounting, economics, and valuation training and displayed a light grasp of issues related to company’s value.

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