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.
5th Circuit backs district court's fair market value determination in ESOP dispute
The district court's determination of overpayment was a function of the contract price and the stock’s fair market value on each of three transaction dates. For its FMV determination, the court considered the testimony of three noted valuation experts retained by the plaintiffs, the DOL, and the defendants respectively. Different experts used different methods, different assumptions, different estimates, and they reached different conclusions. But they all used multiple approaches to produce several FMV estimates on the transaction dates. To arrive at a final value determination, or range of values, they all averaged or weighted the results.
Cdx Holdings, Inc. v. Fox (Fox II)
In medical company valuation case, high court affirms award to option holders based on deference owed to trial court’s findings of historical fact; dissent says Chancery’s dismissal of board members’ valuation testimony evinces Chancery’s hindsight bias.
High Court Dissent Rebukes Chancery’s Analysis in Option Valuation Case
In medical company valuation case, high court affirms award to option holders based on deference owed to trial court’s findings of historical fact; dissent says Chancery’s dismissal ...
Parties’ Valuation Contract Precludes Review of Minority Discount
In share buyback case where parties agree to retain joint appraiser, whom they know from past appraisals of company, and commit to be bound by appraiser’s valuation, court declines to consider seller’s challenge to appraiser’s use of minority discount.
Demand for Executive Compensation Data Lacks ‘Proper Purpose’
Appeals court finds no error in trial court’s rejection of plaintiff’s demand for inspection of corporate records on executive compensation, where expert testimony showed information was not necessary to value plaintiff’s minority interest in company.
Grant v. Grant
Appeals court says use of DLOM in valuing interest for divorce depends on interest’s characteristics not owner’s intent to sell the interest, but appeals court affirms trial court’s decision to apply “slight” or no DLOM based on intent to sell analysis.
Perez v. Bruister (II)
5th Circuit upholds district court’s liability and remedy findings in ESOP case; lower court’s weighting and averaging of valuation results offered by parties’ experts to compute amount of overpayment “was founded in established valuation methodology.”
‘Dramatic’ Valuation Adjustment Justifies Equity Committee
In a rare nod to shareholder concerns, Bankruptcy Court approves formation of equity committee based on “dramatic adjustment in valuation” and inconsistent management positions as to financial health of debtors pre-Chapter 11 and post-petition filing.
In re Horsehead Holding Corp.
In a rare nod to shareholder concerns, Bankruptcy Court approves formation of equity committee based on “dramatic adjustment in valuation” and inconsistent management positions as to financial health of debtors pre-Chapter 11 and post-petition filing.
Lay Testimony About Offer to Buy Represents Admissible Valuation Evidence
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.
Jafar v. Mohammed
In partnership dispute, appeals court affirms redemption award based on multiple-of-earnings valuation, finding valuation was reliable and admissible under state equivalent of Daubert and trial court had discretion to disregard other indicators of value.
Bankruptcy Court Favors DCF to Value Dissociated Interest
Court finds debtor’s fraudulently conveyed interest represents a dissociated interest that is held by the estate; appropriate valuation date is date of trial, and DCF analysis, as modified by court, best captures value of the interest at that time.
Bocek v. JGA Assocs., LLC
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.
In re Discontinuance & Disposition of P.K. Smith Motors, Inc.
Trial court did not err when it enforced shareholder agreement lacking purchase price and based buyout price on defense expert testimony; opposing expert committed “severe flaws in his methodology and the valuations based upon them,” appeals court says.
Business Debt Renders Expert’s Lack of BV Credentials Inconsequential
Appeals court says trial court’s decision to admit opinion of seasoned CPA expert who was not a credentialed business valuator was not error because valuation was a “non-issue” where evidence showed the indebted company was no longer a going concern.
Value Determination Accords With Parties’ Contract, Chancery Says
Court says valuation firm’s determination of value of defendants’ put units accords with agreement to which plaintiff and defendants committed themselves; since contract does not provide for judicial review, court won’t “second-guess” valuator’s judgment.
Tax Court Explains Valuation Method Behind Solvency Ruling
In transferee liability case, Tax Court reconsiders parts of its original solvency determination and clarifies that its analysis relies largely on IRS expert’s market multiple valuation, rather than the asset accumulation value the expert had recommended.
‘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.
Curran v. Curran
In share buyback case where parties agree to retain joint appraiser, whom they know from past appraisals of company, and commit to be bound by appraiser’s valuation, court declines to consider seller’s challenge to appraiser’s use of minority discount.
Pearson v. Westervelt Co.
Appeals court finds no error in trial court’s rejection of plaintiff’s demand for inspection of corporate records on executive compensation, where expert testimony showed information was not necessary to value plaintiff’s minority interest in company.
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.
PECO Logistics, LLC v. Walnut Inv. Partners, L.P.
Court says valuation firm’s determination of value of defendants’ put units accords with agreement to which plaintiff and defendants committed themselves; since contract does not provide for judicial review, court won’t “second-guess” valuator’s judgment.
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.