Verghetta v. Lawlor
In statutory fair value proceeding to enable buyout of minority interest in limited liability companies, New York court says prevailing expert opinion understates future income stream; court upward adjusts by eliminating DLOM and disallowing tax affecting ...
Call for change in New York’s DLOM stance gains steam
A "new note" in the hotly debated NY DLOM issue was sounded in an article in the January issue of Business Valuation Update. In the article, “NY’s Unfair Application of Shareholder-Level Marketability Discounts,” Gil Matthews and Michelle Patterson (both with Sutter Securities) write that New York “stands alone in that it favors (and some lower courts believe requires) the imposition of a marketability discount on dissenting shareholders in fair value determinations. There is broad consensus that DLOMs should seldom, if ever, be permitted in appraisal or oppression cases.”
New Jersey DLOM ruling inches ancient dissenting shareholder suit to conclusion
The parties' most recent fight focused on whether the prevailing expert's DCF analysis embedded a marketability discount to account for illiquidity. If not, the trial court had to decided what the appropriate DLOM rate was. The plaintiff-selling shareholder argued in favor of a zero DLOM, the defendants-buying shareholders presented an expert valuation that specified a 35% DLOM, based on the expert's use of a market approach.
‘Reasonably Equivalent Value’ Analysis Meets FMV Standard, Court Says
On remand, Bankruptcy Court determines sale of plaintiff’s subsidiaries to defendants yielded “reasonably equivalent value” when viewed from objective creditor’s perspective, under FMV standard and without considering debtor’s subjective needs or beliefs.
Chancery declines to meddle in parties' valuation agreement
In terms of valuation methodology, the agreement provided that “there shall be no minority or non-marketability discount applied.” Also, “fair market value” meant an arm’s length sale to an unrelated third party. And, for purposes of calculating the “total equity value,” the value of the assets would be subject to an EBITDA collar to ensure that the value of the assets was at least 6.5 x but no more than 7.5 x the company’s “EBITDA less Maintenance Capex” for year-end 2013. The resulting number was to be reduced by the company’s obligations and liabilities. Most important, the parties agreed to be bound by the appraiser's calculation of the price of the put units. There was no provision for judicial or any other form of review of the appraiser's valuation.
In re Estate of Bittner (Bittner II)
Appeals court affirms probate court’s ruling that ambiguous shareholder agreement requiring determination of fair market value of decedent’s minority interest in closely held companies accommodated use of discounts for lack of marketability and control.
Berger v. Berger
Appeals court says nonexpert testimony on a real-world offer to buy owner-spouse’s company was relevant and, therefore, admissible because it provided valuation evidence based on market approach; court remands for rehearing on all valuation testimony.
South Carolina Supreme Court Makes New Law on Business Goodwill
In a first, state high court “cautiously” decides enterprise goodwill is marital property subject to equitable division and affirms that personal goodwill is not; court rejects claim that only professionals can develop personal goodwill in a business.
Wisniewski v. Walsh (Wisniewski II)
In dissenting shareholder suit, appeals court upholds trial court’s finding that prevailing DCF analysis did not account for illiquidity by way of a separate marketability discount, as well as court’s finding that appropriate DLOM rate was 25%.
Expert’s Application of Asset Approach ‘Defies Common Sense’
Court rejects income approach for valuing interest in business with low bar of entry and few repeat customers; court also says asset-based valuation following Section 179 tax treatment understates true value of the company and requires upward adjustment.
Court Declines to Attribute Commercial Goodwill to Solo Practice
Appeals court affirms trial court’s ruling finding that, without noncompete from owner-spouse, under FMV standard, financial advisor’s solo practice fetches only net book value of its tangible assets; most of value lies in owner-spouse’s personal goodwill ...
Husband's Roles in Company Negate Need for DLOC
Court affirms valuation of husband’s minority interest in business featuring zero DLOC where husband was key driving force behind business’s success and wielded influence and control; use of asset approach rendered double-dip theory inapplicable.
In re Mercury Companies, Inc. (II)
On remand, Bankruptcy Court determines sale of plaintiff’s subsidiaries to defendants yielded “reasonably equivalent value” when viewed from objective creditor’s perspective, under FMV standard and without considering debtor’s subjective needs or beliefs.
Moore v. Moore
In a first, state high court “cautiously” decides enterprise goodwill is marital property subject to equitable division and affirms that personal goodwill is not; court rejects claim that only professionals can develop personal goodwill in a business.
K.T. v. M.T.
Appeals court affirms trial court’s ruling finding that, without noncompete from owner-spouse, under FMV standard, financial advisor’s solo practice fetches only net book value of its tangible assets; most of value lies in owner-spouse’s personal goodwill ...
In re Marriage of Hartung
Court rejects income approach for valuing interest in business with low bar of entry and few repeat customers; court also says asset-based valuation following Section 179 tax treatment understates true value of the company and requires upward adjustment.
No Automatic Bar to Minority Discount in Divorce Cases
Appeals court says state law does not bar use of minority share discount in divorce cases and declines to impose a bright-line rule; rather, the trial court has to consider interest holder’s level of control and likelihood of sale before use of discount.
Court Affirms Rightness of Expert’s ‘Marital Value’ Calculation
Court upholds expert’s idiosyncratic valuation approach based on ascertaining “marital value” of community’s grocery stores as opposed to stores’ “investment value”; since the stores were not sold, valuation properly captured their value to owner spouse.
Sieber v. Sieber
Court affirms valuation of husband’s minority interest in business featuring zero DLOC where husband was key driving force behind business’s success and wielded influence and control; use of asset approach rendered double-dip theory inapplicable.
Court Backs Away From Support for Double-Dip Theory
In a divorce case involving dental practice, appeals court says using income stream “as a tool” to value a professional business and then using it “as actual income for a spousal support calculation” does not per se amount to impermissible double dipping.
Schickner v. Schickner
Appeals court says state law does not bar use of minority share discount in divorce cases and declines to impose a bright-line rule; rather, the trial court has to consider interest holder’s level of control and likelihood of sale before use of discount.