Stale Fairness Opinions in Related Party Transactions Should Be Updated
It is common practice for proxy statements to contain fairness opinions that are dated weeks (or months) prior to the mailing date. Typically, they are not reviewed in the interim, which can be a problem.
Work File Checklist for Contributory Asset Charges
Based on the Mandatory Performance Framework (MPF) for the Certified in Entity and Intangibles Valuation (CEIV) credential, this checklist helps document contributory asset charges, which are charges against revenues to reflect a fair return on or return of contributory assets used in the generation of the cash flows associated with the intangible asset being valued.
New Board and Pending Standards Highlight PCAOB Update
At the recent ASA/USC 13th Annual Fair Value Conference in Los Angeles, George Wilfert, deputy director of the Public Company Accounting Oversight Board (PCAOB), gave an update on the organization's activities.
BVU News and Trends September 2018
A monthly roundup of key developments of interest to business valuation experts.
Tennessee embraces ‘modern’ valuation methods in fair value determination
In a key valuation decision, the Tennessee Supreme Court recently overruled precedent on how to determine fair value in a dissenting shareholder suit.
Mesirov v. Enbridge Energy Co.
In dispute over related-party transaction, court upholds aiding and abetting claim against financial advisor; plaintiffs produced enough facts to show fairness opinion ignored most relevant precedent transaction and other valuation metrics indicating the buyer was overpaying for contested asset.
Fairness Opinion Triggers Viable Aiding and Abetting Claim Against Financial Advisor
In dispute over related-party transaction, court upholds aiding and abetting claim against financial advisor; plaintiffs produced enough facts to show fairness opinion ignored most relevant precedent transaction and other valuation metrics indicating the buyer was overpaying for contested asset.
Comments due on CVFI performance framework
The AICPA is launching the Certified in Valuation of Financial Instruments (CVFI) credential, and an exposure draft of a “performance framework” has been issued (dated Aug. 13, 2018) that establishes parameters of documentation requirements. Comments are due September 17.
Deal price vs. the DCF: Two new Delaware cases grapple with ‘transformed’ fair value landscape
With the landmark rulings in DFC Global and Dell, the Delaware Supreme Court has given its “full-throated endorsement” of market efficiencies by declaring the deal price (minus synergies) a strong indicator of statutory fair value, say two new statutory appraisal opinions from the Court of Chancery.
Stay on the leading edge of fair value for financial reporting
If you stop and think about it, the area of fair value measurements has driven the development of business valuation theory in the recent past to a great extent.
How to document the selection of a royalty rate when valuing intellectual property assets or rights
Under the Mandatory Performance Framework (MPF) for the Certified in Entity and Intangibles Valuation (CEIV) credential, valuation experts will be expected to have a certain amount of documentation in their work files. Regardless of whether you hold the CEIV credential or not, anyone doing fair value for financial reporting should comply with these new rules. This post covers how to document the selection of a royalty rate when valuing intellectual property assets or rights.
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.
Virginia court nixes challenge to appraisal done according to valuation agreement
In the category of buyout disputes notwithstanding a valuation agreement, a recent Virginia case stands out for showing the evidentiary hurdle a challenger must overcome to defeat a third-party appraisal done in accordance with a controlling agreement.
Expert’s Detailed Risk Analysis Bolsters Use of Deep Discount in Law Firm Valuation
In buyout dispute over law firm interest, court credits firm’s expert, noting his extensive relevant experience, his taking care to value interest under fair market value standard, as required by the partnership agreement, and his detailed risk analysis to support a deep discount.
Fredericks Peebles & Morgan LLP v. Assam
In buyout dispute over law firm interest, court credits firm’s expert, noting his extensive relevant experience, his taking care to value interest under fair market value standard, as required by the partnership agreement, and his detailed risk analysis to support a deep discount.
Lack of Facts and Data Render Expert’s Fair Value Balance Sheet Not Helpful
Bankruptcy Court excludes as unreliable and irrelevant expert’s solvency opinion and balance sheet; court says expert lacked the facts and data necessary to enact his chosen method and “failed in numerous ways” to reliably apply the facts and data in accordance with the selected method.
Weinman v. Crowley (In re Blair)
Bankruptcy Court excludes as unreliable and irrelevant expert’s solvency opinion and balance sheet; court says expert lacked the facts and data necessary to enact his chosen method and “failed in numerous ways” to reliably apply the facts and data in accordance with the selected method.
Work File Checklist for the Selection of Royalty Rates
Based on the Mandatory Performance Framework (MPF) for the Certified in Entity and Intangibles Valuation (CEIV) credential, this checklist helps document the selection of a royalty rate when valuing intellectual property assets or rights such as trademarks, trade names, or patents.
Delaware’s Unwarranted Assumption That Capex Should Equal Depreciation in a DCF Model
Delaware fair value proceedings have predominantly adopted the erroneous assumption that capital expenditures should equal the sum of depreciation and amortization in determining terminal value. Here’s an analysis of these flawed decisions.
BVU News and Trends August 2018
A monthly roundup of key developments of interest to business valuation experts.
In re Appraisal Solera Holdings, Inc.
In an appraisal proceeding, the Chancery finds the deal price minus synergies provides the best evidence of fair value; court says there was an efficient market and the sales process, though not perfect, was able to deliver the value generated in an arm’s-length transaction.
Delaware Chancery Says Reasonably Sound Sales Process Delivered Fair Value
In an appraisal proceeding, the Chancery finds the deal price minus synergies provides the best evidence of fair value; court says there was an efficient market and the sales process, though not perfect, was able to deliver the value generated in an arm’s-length transaction.
Blueblade Capital Opportunities LLC v. Norcraft Cos.
Chancery rejects deal price as indicator of fair value, citing problematic sales process, and rejects use of unaffected trading price, citing company’s lack of trading history; court instead relies on its own DCF analysis, drawing on the most credible aspects of each expert’s analysis.
Flawed Sales Process Has Chancery Revert to DCF to Determine Fair Value
Chancery rejects deal price as indicator of fair value, citing problematic sales process, and rejects use of unaffected trading price, citing company’s lack of trading history; court instead relies on its own DCF analysis, drawing on the most credible aspects of each expert’s analysis.
Fair Value in 2018: The Impact of the Tax Cuts and Jobs Act
What in business valuation does the Tax Cuts and Jobs Act impact? Everything—including fair value. Join Mark Edwards for a discussion on how NOLs, goodwill, and ASC 805 are all impacted by recent tax law changes. Understand the base erosion anti-avoidance tax provisions and how expensing tangible property impacts your fair value assignments. Be confident in the changes you make for 2018 engagements with a thorough review of your income and market approaches.