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Items of Interest Gleaned From the ASA Conference Networking Ops

BV firm staffing troubles, Shannon Pratt’s video remarks about his new book, a new app for fractional interests, a heightened interest in businesses with a real estate component, and help needed in developing a new module for the Cost of Capital Navigator are just some of the things we learned outside the regular sessions at the ASA conference—in and around the exhibit hall and during the many networking breaks.

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.

BV News and Trends November 2021

A monthly roundup of key developments of interest to business valuation experts.

V5 Techs., LLC v. Switch, Ltd.

This case was a motion to reconsider the court’s ruling that struck expert testimony because the expert used the discounted cash flow method to determine the value of a business that went out of business. Upon reconsideration, the court decided that such method was allowable in this case and, therefore, the testimony should be reinstated and presented to the jury for use in determining damages.

Court Reverses Its Order to Strike Expert Testimony That Utilized the Discounted Cash Flow Method in Valuing a Business

This case was a motion to reconsider the court’s ruling that struck expert testimony because the expert used the discounted cash flow method to determine the value of a business that went out of business. Upon reconsideration, the court decided that such method was allowable in this case and, therefore, the testimony should be reinstated and presented to the jury for use in determining damages.

New online tool for valuing fractional interests

This October will see the launch of the Partner Value Expert (PVX), an online application that represents a new approach to valuing fractional interests involving real estate.

Decoding the Cross-Professional Maze: A Guide to Persuasive Real Estate-Related Valuations

Key disconnects between the real estate and business valuation professions that can blow up holding company and other real estate-related valuations. Join Dennis A. Webb to learn about the built-in conflicts between real estate appraisal and business valuation. Do you think that the two related professions would have a common understanding of valuation premises, use of data, and the appraisal process generally? They don’t. Misunderstandings and blind spots affect valuations of pretty much any business ...

Cont'l Investors Fund LLC v. TradingScreen Inc.

The defendant did not breach its redemption agreement because a committee of directors, “properly engaged in the judgment-laden task of determining the amount of funds that the company could use for redemptions … [and] determined that using a greater amount of cash to redeem more shares threatened the company's ability to continue as a going concern.” As a result, interest on the asserted obligation back to 2013 was not allowed at 13%, the amount per the agreement.

Company Did Not Breach Its Redemption Agreement Because of Diligence of Directors

The defendant did not breach its redemption agreement because a committee of directors, “properly engaged in the judgment-laden task of determining the amount of funds that the company could use for redemptions … [and] determined that using a greater amount of cash to redeem more shares threatened the company's ability to continue as a going concern.” As a result, interest on the asserted obligation back to 2013 was not allowed at 13%, the amount per the agreement.

Evaluating and Applying Control Premiums

In recent years, a greater amount of scrutiny has been placed on valuation analysts’ selection and use of control premiums. As a result, there has been a renewed interest in distinguishing acquisition premiums from control premiums and equity premiums from invested capital premiums. Join Timothy Meinhart for a comprehensive discussion of the proper quantification and application of acquisition premiums and control premiums and also learn about the benefits of using market-based invested capital premiums rather ...

Boesch v. Holeman

In dispute over value of dissociated partner’s one-third interest in whiskey business, appeals court says trial court erred in adopting value determination that applied discount for lack of control; applicable partnership law requires value be based on sale of entire business as a going concern.

Partnership Statute Precludes Use of Minority Discount in Buying Out Dissociated Partner

In dispute over value of dissociated partner’s one-third interest in whiskey business, appeals court says trial court erred in adopting value determination that applied discount for lack of control; applicable partnership law requires value be based on sale of entire business as a going concern.

Court Finds Valuation of Debtor Entity Must Account for COVID-19 Effect on Industry

Court finds creditor’s interest in debtor’s property is “inconsequential” and says a valuation of debtor’s fitness club must account for dismal state of fitness industry due to COVID-19 shutdown; debtor’s projections related to reorganization plan are too optimistic given economic uncertainty.

In re Body Transit

Court finds creditor’s interest in debtor’s property is “inconsequential” and says a valuation of debtor’s fitness club must account for dismal state of fitness industry due to COVID-19 shutdown; debtor’s projections related to reorganization plan are too optimistic given economic uncertainty.

Fair Value Standard Does Not Preclude Use of Net Asset Approach, Court Affirms

In statutory appraisal case, court denies summary judgment motion arguing opposing expert’s valuation fails to meet legal definition of fair value, i.e., “the value of the company as a whole and as a going concern”; court says controlling case law does not preclude use of net asset value method.

Henley Mining v. Parton

In statutory appraisal case, court denies summary judgment motion arguing opposing expert’s valuation fails to meet legal definition of fair value, i.e., “the value of the company as a whole and as a going concern”; court says controlling case law does not preclude use of net asset value method.

BVU News and Trends July 2020

A monthly roundup of key developments of interest to business valuation experts.

Court Rejects FMV Appraisal of Dissociated Member’s Interest in Statutory Buyout

In buyout following member’s disassociation from company, appellate court affirms trial court’s fair value determination, including decision to exclude from valuation remaining members’ unsubstantiated debt claims and including litigation amount assessed against dissociated member for misconduct.

Flynn v. Maschmeyer

In buyout following member’s disassociation from company, appellate court affirms trial court’s fair value determination, including decision to exclude from valuation remaining members’ unsubstantiated debt claims and including litigation amount assessed against dissociated member for misconduct.

Should you consider a special COVID-19 premium?

During a recent webinar, a question came up as to whether or not valuation analysts should be separately identifying a risk rate associated with the impact of COVID-19 on a subject company.

Don’t Automatically Reject the Asset Approach for Going Concerns

Many valuation analysts immediately reject the asset-based approach for operating businesses, but this is a problem, say Robert Reilly and Weston Kirk, who are both with Willamette Management Associates. The method is rejected too often because analysts are not familiar enough with the asset approach or they have misconceptions about when (and when not) to apply it.

Applications of the Asset-based Approach to Value Operating Businesses

In this presentation with Robert Reilly and Weston Kirk they describe —and illustrate —the practical procedures related to the generally accepted asset-based approach to business valuation. First, explore the client situations in which the analyst should consider applying the asset-based approach. Second, review the generally accepted business valuation methods within the asset-based approach, including the asset accumulation method (AA method) and the adjusted net asset value method (ANAV method). Third, review the procedures for valuing ...

Washington appeals court issues key ruling on entity goodwill

In a “complicated” (court’s word) dissolution case, the Washington Court of Appeals recently made an important ruling on whether a professional limited liability company (PLLC) can have goodwill separate from the goodwill of the professionals.

McLelland v. Paxton

In dissolution dispute, appeals court affirms trial court’s finding, based on plaintiff expert testimony, that dissolved professional LLC had entity goodwill at trial based, in large part, on ownership of three leases and operation of offices that doctors could use upon termination of partnership.

Washington State Appeals Court Adopts Rule on Entity Goodwill in Professional LLC

In dissolution dispute, appeals court affirms trial court’s finding, based on plaintiff expert testimony, that dissolved professional LLC had entity goodwill at trial based, in large part, on ownership of three leases and operation of offices that doctors could use upon termination of partnership.

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