Appellate court KOs discount for trapped-in capital gains taxes
In a Louisiana case, a dissenting shareholder was withdrawing her shares in a company and the valuation of her interest was in dispute, so a trial was held.
Year-end 2021 data now in the Cost of Capital Professional
Year-end 2021 data, including equity risk premia, CRSP decile size premia, and industry betas/IRPs, are now available in BVR’s Cost of Capital Professional platform.
Damodaran posts second data update, explains implied ERP
An extensive amount of free data on risk-free rates, equity risk premiums (ERPs), corporate default spreads, corporate tax rates, country risk premiums, and more can be found on the website of Professor Aswath Damodaran (New York University Stern School of Business), who generously posts updates each year.
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.
Cain v. Cain
The Nebraska District Court in this case accepted the value of the wife’s expert testimony at trial as to the value of the husband’s 50% interest in his business. Both appraisers included DLOMs in determining value, and both appraisers utilized appropriate valuation methodologies. The difference in the two valuations is a matter of the difference in professional judgment.
The Nebraska District Court’s Determination of the Value of a Husband’s Business Is Affirmed—Appraisers Used Acceptable Valuation Methodology
The Nebraska District Court in this case accepted the value of the wife’s expert testimony at trial as to the value of the husband’s 50% interest in his business. Both appraisers included DLOMs in determining value, and both appraisers utilized appropriate valuation methodologies. The difference in the two valuations is a matter of the difference in professional judgment.
BV Year in Review 2021: End of an Era
A recap of significant new ideas and developments as reported in over 70 articles and hundreds of news items in the pages of Business Valuation Update during 2021.
BV News and Trends January 2021
A monthly roundup of key developments of interest to business valuation experts.
Cost of Capital in Cross-Border Valuations
Join Carla Nunes and James P. Harrington, both of Kroll (formerly Duff & Phelps), for a presentation about developing cost of capital estimates for cross-border (i.e., international) valuations. This presentation includes a comprehensive case study along with a framework for cross-border valuations and common errors to avoid. Hear a discussion of models and data sources, and see the models in action.
Valuing Small Owner-Operated Business
Small owner-operated businesses have unique characteristics that are fundamentally different from other businesses. These differences should be taken into consideration when performing valuations. Join David Coffman for a dive into those characteristics and a detailed description on how they impact valuation procedures and conclusions. Learn about the market for small owner-operated business valuations.
Appeals court OKs one discount, KOs another in divorce matter
In a California divorce matter, the husband’s expert applied two discounts to the valuation of the wife’s one-half interest in his business: one discount for possible future taxes and one for a discount for lack of marketability (DLOM).
New case points up valuation perils in buy-sell agreements
From a valuation standpoint, the lack of a buy-sell agreement—or one with a valuation provision that’s poorly drafted—can result in costly litigation and a painful falling out between business partners and/or family members.
Damodaran posts his data update for 2022
Each year, Professor Aswath Damodaran (New York University Stern School of Business) generously posts a great amount of data on his website that include risk-free rates, equity risk premiums (ERPs), corporate default spreads, corporate tax rates, country risk premiums, and other data—all of which are free.
Kroll reviews 2021 capital markets
“Capital Markets Insights—2021 Year in Review” offers a look at the past year in terms of notable S&P 500 performers, DJIA performers, M&A deals, PE deals, IPOs, SPACs, bankruptcies, cost of capital, and private markets.
Bohac v. Benes Serv. Co.
The Nebraska District Court in this case applied discounts to its determination of fair value (FV). The Supreme Court found that the district court did not use the correct definition of fair value, resulting in discounts being applied to the estate’s shares. The Supreme Court also found that the proper premise of value was going concern and the proper methodology for value was the asset approach. The Supreme Court also allowed as a liability the deferred tax on potential future sale of assets by the corporation.
The Nebraska District Court Is Reversed in Its Determination of Fair Value
The Nebraska District Court in this case applied discounts to its determination of fair value (FV). The Supreme Court found that the district court did not use the correct definition of fair value, resulting in discounts being applied to the estate’s shares. The Supreme Court also found that the proper premise of value was going concern and the proper methodology for value was the asset approach. The Supreme Court also allowed as a liability the deferred tax on potential future sale of assets by the corporation.
Silver lining to Vinoskey ESOP appeal decision
In the well-publicized Vinoskey ESOP case (our latest coverage is here), the appellate court affirmed the district court in deciding that the company owner had extensive knowledge about the company and its prior valuations, and, thus, it was plausible to infer that “something was off.”
Updated ‘Stout Restricted Stock Study Companion Guide’ available
The most widely used restricted stock transaction database for providing empirical support for a discount for lack of marketability (DLOM) is the Stout Restricted Stock Study (formerly FMV Opinions).
Business Valuation Update Yearbook, 2022 Edition
January 2022 PDF (454 pages)
BVR (editor)
Business Valuation Resources, LLC
BV News and Trends December 2021
A monthly roundup of key developments of interest to business valuation experts.
ShopRite, Inc. v. Gardiner
In determining the fair value of a minority interest in stock sold back to the companies in a shareholder oppression assertion, the Louisiana Court of Appeals rejected a discount for trapped-in capital gains tax since the companies had no intention of selling the properties owned. The appeals court also disallowed a reduction in fair value related to the value of affiliated accounts receivable, noting that there was no evidence that the receivables were uncollectible.
Louisiana Court of Appeals Disallows a Discount for Trapped-In Capital Gains Taxes and a Reduction in Receivables for Collectability
In determining the fair value of a minority interest in stock sold back to the companies in a shareholder oppression assertion, the Louisiana Court of Appeals rejected a discount for trapped-in capital gains tax since the companies had no intention of selling the properties owned. The appeals court also disallowed a reduction in fair value related to the value of affiliated accounts receivable, noting that there was no evidence that the receivables were uncollectible.
Updated NICE DLOM model available for free download
During a recent BVR webinar, Will Frazier (Weaver) did a demo of the revised version of his nonmarketable investment company evaluation (NICE) method for estimating a discount for lack of marketability (DLOM).
Use of DCF for damages survives challenge
In an antitrust lawsuit in Nevada, the expert for a company that alleges it was forced to close due to anticompetitive practices used the discounted cash flow (DCF) method to calculate damages.
Harvey v. Harvey (In re Michael S.)
In this divorce case, on appeal, the California appellate court rejected a discount for taxes not immediate and specific and allowed a DLOM regarding the value of the wife’s one-half interest in the jointly owned business. The court also determined that “the [trial] court impliedly made the factual findings necessary to support its ruling regarding Cynthia’s breach of fiduciary duty claim.” Finally, the appeals court determined that the trial court had the authority to set its own terms for payment of the equalization amount to the wife.