Hitchner busts more BV myths
Does the fair market value standard assume a financial buyer, without synergistic benefits?
Lone dissenter of medical merger challenges share valuation
In a California case, a physician was a nonexclusive provider to a physician network and was one of 75 shareholders.
Private Equity Roll Up of Professional Practices Valuation Considerations
This webinar transcript focuses on private equity roll-up acquisitions of professional practices and the possible effect of these transactions on business valuation.
Court has limited menu for steakhouse valuation
In a Michigan case, two 50% owners of a Ponderosa steakhouse were locked in a battle over the Old West-themed eatery, with both owners engaging in oppressive conduct against the other. They left it up to the court to decide their fate.
Power Panel: How Should Healthcare BV Practice Change in Response to the New Stark Regulations?
In this power panel discussion, key thought leaders in healthcare business valuation discuss the ramifications of the recent update to the Stark regulations on BV practices.
Takeaways From ASA’s ESOP Virtual Conference
ESOP valuation basics, sell-side transactions, issues with mature ESOPs, and common critiques with valuations in litigation were the topics of discussion at ASA ESOP Virtual Conference.
Valuation Implications of the Changing ESOP Litigation Landscape
The tide has started to turn with respect to litigation over ESOP valuations, speakers reported at the recent ASA ESOP Virtual Conference. There has been a major court victory and pressure from the ESOP and valuation profession, and now the DOL has committed to moving forward—hopefully— with long-awaited regulations on the valuation of company shares to be bought by an ESOP.
Vieira v. Think Tank Logistics, LLC (In re Levesque)
In this adversary Chapter 7 proceeding, the trustee sought to avoid the debtor’s transfer of his interest in two corporate entities and either recover the interests or the value of such interests from the defendants. As part of this proceeding, the court was asked to decide on two motions in limine regarding an valuation expert from each side. The motions (Daubert) asked that the experts not be allowed to testify. The court granted in part and denied in part the motions of the parties.
Bankruptcy Court (South Carolina) Grants in Part and Denies in Part Motions to Exclude Experts in Daubert Motions
In this adversary Chapter 7 proceeding, the trustee sought to avoid the debtor’s transfer of his interest in two corporate entities and either recover the interests or the value of such interests from the defendants. As part of this proceeding, the court was asked to decide on two motions in limine regarding an valuation expert from each side. The motions (Daubert) asked that the experts not be allowed to testify. The court granted in part and denied in part the motions of the parties.
Physician Shareholder Asserts Transaction Bonuses Breach Board’s Fiduciary Duties—Appeals Court Finds Them Just and Reasonable
A physician shareholder claimed that the fair market value of his one share (of 75 total shares) was undervalued when the physician practice was merged and sold to NAMM California, a company that develops and manages physician provider networks. NAMM paid $18 million in the merger, and over $12 million of that amount was paid to individual physician shareholders in the form of “transaction bonuses.” The remaining almost $6 million was paid pro rata to the shareholders. The plaintiff appealed the judgment of the California trial court, but the appellate court deemed the transaction bonuses as “just and reasonable” and affirmed the trial court.
Ghaly v. Riverside Cmty. Healthplan Med. Grp.
A physician shareholder claimed that the fair market value of his one share (of 75 total shares) was undervalued when the physician practice was merged and sold to NAMM California, a company that develops and manages physician provider networks. NAMM paid $18 million in the merger, and over $12 million of that amount was paid to individual physician shareholders in the form of “transaction bonuses.” The remaining almost $6 million was paid pro rata to the shareholders. The plaintiff appealed the judgment of the California trial court, but the appellate court deemed the transaction bonuses as “just and reasonable” and affirmed the trial court.
Bankruptcy Court Determines Fair Value Under Asset Approach With ‘Limited Evidence’ Available to It
This case involved a hotly contested battle over the fate of a Ponderosa restaurant in Michigan. The two owners, having had a falling out, pursued contentious litigation to wrest control of the restaurant from each other. Having no business valuation available to the court, the court was left with a real estate appraisal and limited evidence of assets and liabilities to determine the fair value of a 50% interest in the restaurant to be used in the buyout of one of the shareholders by the other shareholder.
Herremans v. Fedo (In re Herremans)
This case involved a hotly contested battle over the fate of a Ponderosa restaurant in Michigan. The two owners, having had a falling out, pursued contentious litigation to wrest control of the restaurant from each other. Having no business valuation available to the court, the court was left with a real estate appraisal and limited evidence of assets and liabilities to determine the fair value of a 50% interest in the restaurant to be used in the buyout of one of the shareholders by the other shareholder.
Patent Infringement Damages: Lost Profits and Royalties
If a patent owner can prove another company or party has made, used or sold a product covered by a patent without its permission, the patent owner is entitled, under 35 U.S.C. Section 284, to receive “damages adequate to compensate for the infringement, but in no event less than a reasonable royalty for the use made of the invention by the infringer, together with interest and costs as fixed by the court.” This program focuses ...
Connelly v. United States
The importance of this case was that the 8th Circuit’s decision to affirm the lower court and IRS’ inclusion of life insurance proceeds in the value of the corporation for which decedent’s stock was redeemed. This contradicted the decision of the 11th Circuit in Estate of Blount that 26 C.F.R. § 20.2031-2(f)(2) precluded the inclusion of life-insurance proceeds in the corporate value when the proceeds were used for a redemption obligation.
8th Circuit Affirms District Court—Includes Life Insurance Proceeds in Value of Redeemed Shares
The importance of this case was that the 8th Circuit’s decision to affirm the lower court and IRS’ inclusion of life insurance proceeds in the value of the corporation for which decedent’s stock was redeemed. This contradicted the decision of the 11th Circuit in Estate of Blount that 26 C.F.R. § 20.2031-2(f)(2) precluded the inclusion of life-insurance proceeds in the corporate value when the proceeds were used for a redemption obligation.
BV News and Trends May 2023
A monthly roundup of key developments of interest to business valuation experts.
ES NPA Holding, LLC v. Comm’r
The Tax Court ruled that the class C units were a profits interest because, when applying the fair market value of the LLC at the time of receipt, the partner would not receive any proceeds from a liquidation at that time. Any proceeds in excess of fair market value would be speculative. No accuracy penalty was appropriate either.
On Liquidation Tax Matters, Partner Would Not Receive Any Proceeds, Interest Received Would Be Nontaxable Profits Interest
The Tax Court ruled that the class C units were a profits interest because, when applying the fair market value of the LLC at the time of receipt, the partner would not receive any proceeds from a liquidation at that time. Any proceeds in excess of fair market value would be speculative. No accuracy penalty was appropriate either.
Financial Expert Guide for Family Law Judges and Attorneys, National Edition
April 2023 PDF, Softcover (413 pages)
John Tatlock, Kevin Yeanoplos, Ron Seigneur
Business Valuation Resources, LLC
Have you tried Abbott’s passive appreciation calculator?
In last week’s BVWire, we mentioned that Dr. Ashok Abbott (West Virginia University) has developed an online application that produces a passive appreciation factor on a national level for businesses in the retail sector.
Court do-over to figure passive appreciation for divorce
In an Ohio divorce case, the trial court made an award to the wife based on the full fair market value of the husband’s business.
Maher v. Cmejrek
The wife appealed the trial court’s decisions as to the values of the husband’s interests in his various medical practices and clinics and challenged the trial court’s determination of the husband’s income for support purposes. The appellate court affirmed the values of the medical practices and clinics and remanded the determination of income for support purposes for recalculation.
Indiana Appellate Court Affirms Valuation of Medical Practice Interests of Husband but Remands for Recalculation of Husband’s Income for Child Support
The wife appealed the trial court’s decisions as to the values of the husband’s interests in his various medical practices and clinics and challenged the trial court’s determination of the husband’s income for support purposes. The appellate court affirmed the values of the medical practices and clinics and remanded the determination of income for support purposes for recalculation.
The Walsh v. Preston ESOP Case—Is It a Victory or an Escape?
Commentary from BVR’s legal editor on an important ESOP valuation case.