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Small Business, Bankruptcy and Business Valuation

The Small Business Restructuring Act makes Chapter 11 reorganization proceedings faster, cheaper and more efficient for companies that come to Bankruptcy Court with debts below the statutory cap. That may allow certain small business to survive the current turmoil resulting from the corona virus pandemic. What is, however, not yet clear is the role of business valuators in the process. Michael Pakter explains what that role might be.

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.

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.

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.

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.

Calculating Fair Value, Court Uses Experts’ Income Analyses but Adjusts for Inconsistencies

In buyout dispute over closely held corporation, State Supreme Court upholds trial court’s value determination based on income-based analyses parties’ experts presented but adjusting for inconsistencies in each opinion; asset approach was inappropriate where company would continue to operate.

Anderson v. A & R Spraying & Trucking, Inc.

In buyout dispute over closely held corporation, State Supreme Court upholds trial court’s value determination based on income-based analyses parties’ experts presented but adjusting for inconsistencies in each opinion; asset approach was inappropriate where company would continue to operate.

Valuing Distressed and Impaired Companies in the Time of Coronavirus

The Coronavirus Pandemic has created perhaps the most unusual economic downturn at least in our lifetimes and likely in the past 100 years. For Americans, the Pandemic stopped in its tracks one of the most explosive economic growth and expansion in many years, if ever. Overnight almost, businesses that were economically sound and growing were turned into distressed and impaired businesses. Jim Alerding will analyze the valuation perspective needed to value a distressed or impaired ...

In Allocation Dispute Related to § 363 Sale, Bankruptcy Court Bridges Experts’ Value Gaps

Bankruptcy court performs allocation analysis to divide proceeds from section 363 asset sale between two competing lenders, finding debtor’s intellectual property is most valuable asset; court notes that, at time of sale, debtor was neither healthy going concern nor subject of forced liquidation.

In re Aerogroup International, Inc.

Bankruptcy court performs allocation analysis to divide proceeds from section 363 asset sale between two competing lenders, finding debtor’s intellectual property is most valuable asset; court notes that, at time of sale, debtor was neither healthy going concern nor subject of forced liquidation.

Wiegers v. Richards-Wiegers

Alaska high court finds trial court was not required to value husband’s shares in closely held company under the liquidation approach the company historically had used in buy-out situations; trial court’s “true asset” approach was based on credible expert testimony.

Trial Court’s ‘True Asset’ Valuation Aligns With Expert’s Testimony

Alaska high court finds trial court was not required to value husband’s shares in closely held company under the liquidation approach the company historically had used in buy-out situations; trial court’s “true asset” approach was based on credible expert testimony.

Congel v Malfitano

In wrongful partnership dissolution, New York high court finds, under applicable statute, exiting partner’s interest may be valued under FMV standard of value; where exiting partner’s interest is minority interest, DLOM and minority discount may apply.

In Wrongful Dissolution, New York’s High Court Approves FMV Valuation

In wrongful partnership dissolution, New York high court finds, under applicable statute, exiting partner’s interest may be valued under FMV standard of value; where exiting partner’s interest is minority interest, DLOM and minority discount may apply.

In re EM Lodgings, LLC

In granting creditor’s stay relief motion, court averages competing expert valuations and finds debtor has no equity in contested hotel; court says value gap is result of experts’ legitimate disagreements over hotel’s future performance as reflected in inputs for DCF-based analyses.

Court Accords Equal Weight to Competing DCF-Based Hotel Valuations

In granting creditor’s stay relief motion, court averages competing expert valuations and finds debtor has no equity in contested hotel; court says value gap is result of experts’ legitimate disagreements over hotel’s future performance as reflected in inputs for DCF-based analyses.

Tax Effects Are Relevant to Equitable Distribution Analysis

Reviewing court says in valuing owner spouse’s auto transport business and performing equitable distribution analysis, trial court erred when it refused to consider tax effects of potential sale of business before assigning asset to owner; case remanded.

Carney v. Carney

Reviewing court says in valuing owner spouse’s auto transport business and performing equitable distribution analysis, trial court erred when it refused to consider tax effects of potential sale of business before assigning asset to owner; case remanded.

Tax Effects Are Relevant to Equitable Distribution Analysis

Reviewing court says in valuing owner spouse’s auto transport business and performing equitable distribution analysis, trial court erred when it refused to consider tax effects of potential sale of business before assigning asset to owner; case remanded.

Absence of Noncompete Drives Goodwill Valuation in Liquidation Sale

In case of voluntary corporate dissolution under judicial supervision, appeals court finds receiver’s minimum bid value was based on correct standard of value (liquidation value) and calculated auction sales price reflected all elements of a going concern ...

Absence of Noncompete Drives Goodwill Valuation in Liquidation Sale

In case of voluntary corporate dissolution under judicial supervision, appeals court finds receiver’s minimum bid value was based on correct standard of value (liquidation value) and calculated auction sales price reflected all elements of a going concern ...

Perry v. Sackett

In case of voluntary corporate dissolution under judicial supervision, appeals court finds receiver’s minimum bid value was based on correct standard of value (liquidation value) and calculated auction sales price reflected all elements of a going concern ...

Tax Court Corrects Prior Valuation of LP Interest to Startling Result

On remand Tax Court recalculates decedent’s minority LP interest in family partnership by relying entirely on DCF value and giving no weight to value of company’s timberland assets; newly calculated value is half the original value.

Unilateral Partnership Dissolution Exacts Steep Price From Wrongdoer

New York appellate court says trial court erred when it declined to apply minority discount in determining “value” of minority shareholder’s interest in partnership where shareholder wrongfully dissolved partnership and buyout was not a fair value proceed ...

Bankruptcy Court’s Going-Concern Valuation Weathers Appeal

In Chapter 7 case, Bankruptcy Court finds trustee expert’s liquidation valuation fails to meet insolvency tests; court says expert’s substantial discounting of debtor’s assets is based on mistaken assumption and incompatible with going-concern valuation.

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