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Most States Reject Discounts in Appraisals and Oppression Cases—But There Are Important Exceptions

This article discusses, on a state-by-state basis, the rejection and acceptance of discounts for minority interest and lack of marketability in appraisals and in oppression and voluntary withdrawal cases. Discounts for lack of marketability at the shareholder level are rejected in most jurisdictions, but some states, including California and New York, still permit them.

Valuing a minority interest with no information on the subject company

In a Maryland divorce case, neither valuation expert had any documents or financial information from the husband’s ambulatory surgical center (ASC) in which he owned a small interest.

DLOM: A Practical Look at a Complex Matter—Part 1

This webinar will cover the theory behind discounts for lack of marketability. We will cover the applicability and the application of using a DLOM on a minority interest as well as on a controlling interest. We will cover the different models and tools that are available for valuators to use when trying to determine the appropriate DLOM.

Goicochea v. Goicochea

This case was an appeal from a trial court’s various decisions relating to a divorce matter. Among other issues appealed, the appellate court affirmed the trial court’s determination of the value of the husband’s small minority interest (0.829301%) in an ambulatory surgery center. The wife’s expert used a prior transaction of a 1.1125% in the center to determine the husband’s value.

Maryland Court Affirms the Value of Husband’s Minority Interest in an Ambulatory Surgery Center

This case was an appeal from a trial court’s various decisions relating to a divorce matter. Among other issues appealed, the appellate court affirmed the trial court’s determination of the value of the husband’s small minority interest (0.829301%) in an ambulatory surgery center. The wife’s expert used a prior transaction of a 1.1125% in the center to determine the husband’s value.

Misusing the Market Prices of High-Vote Shares When Estimating a Discount for Lack of Voting Rights

When analysts estimate a valuation discount for the lack of voting rights in the stock of a private company, they typically look to the public market. Many studies have compared the market prices of publicly traded high-vote shares with the market prices of publicly traded low-vote shares. Unfortunately, when the inputs into these studies are examined, the emperor has no clothes.

Reader Question: How Much Is a Discount for Lack of Voting Rights?

In response to a reader question, we put the BVResearch Pro platform to work to reveal what the studies, valuation textbooks, and court cases say about a discount for nonvoting stock—more than enough material to estimate and substantiate an opinion.

Appellate court KOs discount for trapped-in capital gains taxes

In a Louisiana case, a dissenting shareholder was withdrawing her shares in a company and the valuation of her interest was in dispute, so a trial was held.

Non-Marketable Investment Company Evaluation: Free Resource for Your Next Valuation

When it comes to valuing minority interests in family investment entities such as family limited partnerships, it is apparent that the income approach should now be used alongside the traditional asset/market approach. Join creator William Frazier for a live “nuts and bolts” example of exactly how the nonmarketable investment company evaluation (NICE) method is used. With examples of FLPs with different asset makeups and financial characteristics, this event will arm you with a new tool ...

ShopRite, Inc. v. Gardiner

In determining the fair value of a minority interest in stock sold back to the companies in a shareholder oppression assertion, the Louisiana Court of Appeals rejected a discount for trapped-in capital gains tax since the companies had no intention of selling the properties owned. The appeals court also disallowed a reduction in fair value related to the value of affiliated accounts receivable, noting that there was no evidence that the receivables were uncollectible.

Louisiana Court of Appeals Disallows a Discount for Trapped-In Capital Gains Taxes and a Reduction in Receivables for Collectability

In determining the fair value of a minority interest in stock sold back to the companies in a shareholder oppression assertion, the Louisiana Court of Appeals rejected a discount for trapped-in capital gains tax since the companies had no intention of selling the properties owned. The appeals court also disallowed a reduction in fair value related to the value of affiliated accounts receivable, noting that there was no evidence that the receivables were uncollectible.

Book Review: Business Valuation: An Integrated Theory (BVIT)

Today, there are many fine business valuation textbooks available to the professional business appraiser for guidance and support. The purpose of these publications is to equip the readers with the methodology, techniques and models necessary to produce a credible valuation opinion and report.

Indiana Supreme Court Issues Key Ruling on Discounts in Compelled Buybacks

Last year, in a compelled buyout, the Court of Appeals sided with the departing minority shareholder when it found discounts did not apply in a closed-market sale. In a freshly minted decision, the Indiana Supreme Court reversed the Court of Appeals, finding there was no blanket rule disallowing discounts in a compelled buyback. This is especially true where the parties exercised a shareholder agreement whose terms suggested the use of fair market value.

Indiana Supreme Court issues key ruling on discounts in compelled buybacks

Last year, in a compelled buyout, the Court of Appeals sided with the departing minority shareholder when it found discounts did not apply in a closed-market sale.

Global BVU News and Trends January 2021

Business valuation news from a global perspective.

Indiana Supreme Court Rejects Blanket Rule Against Discounts in Compulsory, Closed-Market Share Buyback

High court says there is no blanket rule against the use of discounts in a compulsory, closed-market buyback; parties’ freedom to contract right allowed for discounts under shareholder agreement that mandated buyback of plaintiff’s minority interest by company under fair market value standard.

Hartman v. BigInch Fabricators & Construction Holding Co., Inc. (Hartman II)

High court says there is no blanket rule against the use of discounts in a compulsory, closed-market buyback; parties’ freedom to contract right allowed for discounts under shareholder agreement that mandated buyback of plaintiff’s minority interest by company under fair market value standard.

Total Beta—Where Does It Fit in Valuation Theory

The valuation of any company by the discounted cash flow method is divided into two different tasks: forecasting cash flows and discounting these same cash flows using the appropriate discount rate. The latter requires a good understanding of the risks faced by the subject company's cash flows to be able to determine the appropriate risk premia to compensate a typical willing buyer and satisfy a typical willing seller. There is a high level of ambiguity ...

Take Control of Your Premiums

Join BVR for a first look at the new Control Premium Study platform. In the session we will cover the basics of the control premium study, discuss the enhancements to the platform, and provide a walkthrough of how to best utilize the new platform to retrieve control premiums, minority discounts, and multiples.

Global BVU News and Trends October 2020

Business valuation news from a global perspective.

Control Discounts and Premiums - What is Old and What is New

Where do they come from? Do they even exist? Should I fear using them? No, this October event doesn’t delve into the supernatural but rather attempts to demystify the methods and resources available to quantify control discounts and/or premiums. Join Jim Ewart and Jim Alerding to learn what is new, what is old, and what matters. Learn the sources, context, and usefulness of control premiums and discounts, and the best practices for determining what they ...

Advising clients on the meaning of ‘fair value’

The phrase ‘fair value’ continues to bedevil the high courts and create very different expectations when parties are forced to figure out what to pay when buying and selling.

BVResearch Pro Tackles Tricky Search for Guidance on a 50% Interest

During a webinar, an appraiser challenges BVR’s BVResearchPro platform to find court cases, articles, or any other material that discusses a marketability discount for a 50% ownership interest in a private company.

‘Particular facts’ justify discounts in mandatory buyback of minority interest, says Missouri high court

Context is “crucial,” the Supreme Court of Missouri recently said in upholding the use of discounts in the court-ordered buyout of a minority owner’s shares in a family business.

Indiana and South Carolina courts issue key discount rulings

The Indiana Court of Appeals and the South Carolina Supreme Court recently issued noteworthy rulings on the appropriateness of discounts in valuing minority interests. The contexts in which the issue arose were different, but both situations amounted to a compelled buyback of shares.

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