BV News and Trends June 2022
A monthly roundup of key developments of interest to business valuation experts.
Sipko v. Koger, Inc.
The Supreme Court of New Jersey, in its second attempt to resolve this long-running shareholder dispute, a “thoroughly chewed apple”, and buyout, reversed the appellate court and remanded the case to the trial court for reinstatement of its valuation of the shareholder’s interest in two businesses and also agreed with the trial court that no marketability discount should be allowed to reduce the amount to be awarded to the plaintiff. The defendants chose not to call their own expert to provide an opinion of the fair value of the shareholder’s interests.
The Supreme Court of New Jersey Accepts Trial Court’s Value of Companies and Denies a Marketability Discount in a Contentious Buyout Dispute
The Supreme Court of New Jersey, in its second attempt to resolve this long-running shareholder dispute, a “thoroughly chewed apple”, and buyout, reversed the appellate court and remanded the case to the trial court for reinstatement of its valuation of the shareholder’s interest in two businesses and also agreed with the trial court that no marketability discount should be allowed to reduce the amount to be awarded to the plaintiff. The defendants chose not to call their own expert to provide an opinion of the fair value of the shareholder’s interests.
BV News and Trends May 2022
A monthly roundup of key developments of interest to business valuation experts.
Estate and Gift: The Complete Valuation Package (A BVR Workshop)
Unwrap all things estate and gift in this engaging session with Marissa Turrell and Carla Glass. This presentation will assume a basic understanding of business valuation, of both operating companies and holding companies, and focus on specifics related to valuing ownership interests for estate and gift purposes. Some topics will focus on issues that arise only in valuation for gift and estate purposes, such as seminal court cases on the matter, Chapter 14, working with ...
Robertson v. Hyde Park
This case was a partnership dispute where the defendant partners tried to buy out the plaintiff partners. On appeal before the New Jersey Superior Court Appellate Division, the defendants argued that the plaintiffs’ dissociation was wrongful and damages should be assessed, discounts for lack of control and marketability should be applied to the value, and the partnership value should be reduced to account for partnership outstanding debts and other amounts. The plaintiffs argued that the trial court erred by relying on the defendants’ expert’s report and not their expert’s report, refusing to increase the value by personal loans taken by the defendant partners, and failing to find that the partnership overpaid management and accounting fees. The appellate court affirmed the trial court with one exception, whether the partnership agreement disassociated properly. On that count, the appellate court determined that the disassociation was appropriate.
New Jersey Appellate Court Affirms Valuation of Shopping Mall, Disallows Any Control or Marketability Discounts, Affirms Proper Dissociation by Plaintiffs
This case was a partnership dispute where the defendant partners tried to buy out the plaintiff partners. On appeal before the New Jersey Superior Court Appellate Division, the defendants argued that the plaintiffs’ dissociation was wrongful and damages should be assessed, discounts for lack of control and marketability should be applied to the value, and the partnership value should be reduced to account for partnership outstanding debts and other amounts. The plaintiffs argued that the trial court erred by relying on the defendants’ expert’s report and not their expert’s report, refusing to increase the value by personal loans taken by the defendant partners, and failing to find that the partnership overpaid management and accounting fees. The appellate court affirmed the trial court with one exception, whether the partnership agreement disassociated properly. On that count, the appellate court determined that the disassociation was appropriate.
BV News and Trends April 2022
A monthly roundup of key developments of interest to business valuation experts.
Kroll increases U.S. normalized risk-free rate to 3.0%
Kroll has increased its recommended normalized risk-free rate to 3.0% from 2.5%, effective April 7.
Twitter poll on the size effect
Wes Gray, a Ph.D., financial analyst, and CEO of Alpha Architect, recently conducted a poll on Twitter about the size effect (implicit in traded stocks where returns can be observed).
Blockage Discounts: How Volume Can Impact Value
Join Pasquale Rafanelli for an exciting look into the complex topic of blockage. Learn what blockage is and how to apply it when valuing securities, stocks, and even artwork. Understand how blockage is different than a discount for lack of marketability. With real-world examples that are applicable to your practice, this event will help you build a defensible conclusion.
BV News and Trends March 2022
A monthly roundup of key developments of interest to business valuation experts.
Damodaran updates his implied ERP in wake of Ukraine invasion
In his blog post on how the crisis in Ukraine is playing out in the markets, Professor Aswath Damodaran (New York University Stern School of Business) updated his implied equity risk premium to 4.73% as of March 16, up from 4.24% at the start of 2022.
Updated versions of two closed-end fund reports for estimating DLOC
Closed-end fund (CEF) data are commonly used to derive discounts for lack of control (DLOC) for closely held holding companies invested in marketable securities.
No valuation adjustment for alleged acts of oppression
In a Connecticut case, four siblings were partners in a number of restaurant properties and one of the partners (who had a 25% interest) was ousted by the others.
AICPA offers free webcast on estate/gift valuations
A two-and-a half-hour webcast on estate and gift valuations is available free of charge from the AICPA.
New case affirms treatment of goodwill in Indiana divorces
In Indiana, enterprise goodwill is includable in the marital estate, but personal goodwill is not (see BVR’s Charting Goodwill map).
BVRPro adds to its ASA BV Review archive
Subscribers to the BVResearch Pro platform can access issues of Business Valuation Review going back to 1982, and the Fall 2021 issue has just been added to the archive.
Two cases on trapped-in gains tax—with opposite outcomes
In a California divorce case we recently covered, an appeals court disallowed a discount for possible future taxes because the taxes were neither immediate nor specific.
Reminder: Feedback wanted on company-level beta module for the Navigator
Kroll (formerly Duff & Phelps) is developing a new module for its Cost of Capital Navigator that will enable users to derive company-level betas based on their own selection of comparable companies.
Why Pre-IPO Studies Are Unsound in Concept and in Practice
This article explains why pre–initial public offering (IPO) studies are not a valid basis for determining marketability discounts. They are unsound in concept because the pre-IPO transactions and the subsequent IPO are priced at materially different dates and because the IPO price is not knowable at the earlier date. They are unsound in practice for several reasons, such as selectivity—the data include only companies that subsequently become publicly traded—and the fact that any pre-IPO discount ...
Dispelling the ‘hired gun’ perception of testifying experts
A question often comes up: “How can two qualified and experienced business valuation experts analyze the same company and come up with widely disparate values?”
New Version of the NICE DLOM Method Now Freely Available
William Frazier (Weaver) has a new version of his nonmarketable investment company evaluation (NICE) method for estimating a discount for lack of marketability (DLOM). An Excel template for the revised version, aptly named NICE-R, is now available.
New Case Points Up Opportunity for Buy-Sell Valuations
A recent court case illustrates that many buy-sell agreements do not adequately address the issue of valuation when an owner exits the firm. This represents an opportunity for valuation experts to review clients’ buy-sell agreements to identify potential problems, which could mean recurring business for the practice.
Reader Question: How Much Is a Discount for Lack of Voting Rights?
In response to a reader question, we put the BVResearch Pro platform to work to reveal what the studies, valuation textbooks, and court cases say about a discount for nonvoting stock—more than enough material to estimate and substantiate an opinion.