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.
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.
BVU News and Trends July 2018
A monthly roundup of key developments of interest to business valuation experts.
‘Does new bonus depreciation apply to intangibles?’
That was a question from the audience at the ASA/USC 13th Annual Fair Value Conference held May 10 in Los Angeles.
Valuing Bonus Depreciation Under the New Tax Law
The Tax Cuts and Jobs Act of 2017 (the Act) provides businesses the ability to deduct capital expenditures as “bonus depreciation” for purchases of qualified property. This article provides a framework for quantifying the value of bonus depreciation in the context of the discounted cash flow method.
Depreciation and Amortization in DCF Analyses and the Impact of the New Tax Law
Do you know how the 2018 Tax Cuts and Jobs Act will impact your financial projections and DCF calculations? Establish a foundation on the key components of cash-flow projections used in discounted cash flow analyses. Join expert Gilbert Matthews for an examination of the often-misunderstood relationship between capital expenditures and depreciation and the appropriate treatment of limited life items such as amortization in DCF analyses. Learn how changes in the corporate tax rate and capital ...
City of Hialeah Emples. Ret. Sys. v. FEI Co.
Court rejects dissenting shareholder’s proxy challenge, finding board member statements about management projections are protected under applicable act’s safe harbor provision; also, court says financial advisor’s fairness opinion did not double count for risk in underlying DCF analysis.
Financial Advisor’s Fairness Opinion Not Materially Misleading
Court rejects dissenting shareholder’s proxy challenge, finding board member statements about management projections are protected under applicable act’s safe harbor provision; also, court says financial advisor’s fairness opinion did not double count for risk in underlying DCF analysis.
Jensen v. Jensen
In deciding whether, in divorce, retained earnings in a closely held company that is separate property are includible in marital estate, appeals court creates presumption against inclusion and requires trial court to perform totality of circumstances review.
Trustee’s Attack on Merger Projections Fails to Resonate With Court
Court says trustee fails to show debtor was insolvent under any applicable financial condition tests; contemporaneous industry analysis and valuations by financing banks belie claim that management projections in support of merger were unreasonable.
Management projections take center stage in bankruptcy case
In a complex bankruptcy case involving players in the petrochemical industry, the court trained its eyes on the management projections underlying a merger that led to the formation of a company that went bankrupt only a year after the close of the transaction.
Pike v. Tex. EMC Mgmt., LLC
In business tort case involving unprofitable entity trying to market a trade secret, court upholds damages award; experts’ EBITDA valuations were based on commonly used method and numerous data sources, and experts linked data to conclusions, court says.
Trustee’s Attack on Merger Projections Fails to Resonate With Court
Court says trustee fails to show debtor was insolvent under any applicable financial condition tests; contemporaneous industry analysis and valuations by financing banks belie claim that management projections in support of merger were unreasonable.
Weisfelner v. Blavatnik (In re Lyondell Chem. Co.)
Court says trustee fails to show debtor was insolvent under any applicable financial condition tests; contemporaneous industry analysis and valuations by financing banks belie claim that management projections in support of merger were unreasonable.
Tax Court Valuation of Public Utility Gets Mixed Marks From State High Court
State Supreme Court says, in valuing public utility, Tax Court had discretion to adopt Commissioner expert’s position on company-specific risk premium and build-up method but failed to explain choice of specific beta factors; Supreme Court remands.
Shareholder Approval ‘Cleanses’ Potential Undervaluation
Per business judgment rule, court dismisses shareholder complaint that board members breached fiduciary duties by rushing to sell entire company where financial advisor had stated separate sales of company’s various business units would maximize value.
Persuasive’ Defense Expert Testimony Defeats ESOP Overpayment Claims
Court says defense expert opinion provides “credible and persuasive” support for court’s conclusion that ESOP financial advisor produced sound fairness and valuation opinions prior to contested transaction; there was no overpayment for stock at issue.
AMERICAN SOCIETY OF APPRAISERS: Business Valuation Committee Special Topics Paper #2 Reinvestment Considerations in Terminal Value Estimates: Capital Expenditures and Depreciation Levels That Result in Appropriate Reinvestment Ratesa
When using a valuation method that incorporates a terminal period net cash flow estimate, the valuation analyst will need to estimate a stabilized level of net cash flow. Two primary components of this net cash flow estimate are normalized depreciation expense and normalized capital expenditures. This technical paper will discuss research that has focused on (1) the long-term relationship between depreciation expense and capital expenditures and (2) the variables that influence this relationship. This paper ...
Tax Court Valuation of Public Utility Gets Mixed Marks From State High Court
State Supreme Court says, in valuing public utility, Tax Court had discretion to adopt Commissioner expert’s position on company-specific risk premium and build-up method but failed to explain choice of specific beta factors; Supreme Court remands.
Minn. Energy Res. Corp. v. Commissioner of Revenue
State Supreme Court says, in valuing public utility, Tax Court had discretion to adopt Commissioner expert’s position on company-specific risk premium and build-up method but failed to explain choice of specific beta factors; Supreme Court remands.
Chancery Achieves Fair Value by Blending Three ‘Imperfect Techniques’
Court says uncertainty about company’s future performance and viability limits reliability of values derived from DCF and multiples-based comparable company analyses as well as deal price; court blends three “imperfect techniques” to determine fair value.
In re OM Group, Inc. Stockholders Litig.
Per business judgment rule, court dismisses shareholder complaint that board members breached fiduciary duties by rushing to sell entire company where financial advisor had stated separate sales of company’s various business units would maximize value.
Shareholder Approval ‘Cleanses’ Potential Undervaluation
Per business judgment rule, court dismisses shareholder complaint that board members breached fiduciary duties by rushing to sell entire company where financial advisor had stated separate sales of company’s various business units would maximize value.