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Global BVU News and Trends October 2020

Business valuation news from a global perspective.

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.

‘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.

Robinson v. Langenbach

State high court upholds trial court’s use of DLOM and minority discount in buyout of minority interest resulting from shareholder oppression; court says there is no “fixed set of factors” trial court must consider for fair value calculation; “context is crucial” and here justified discounts.

High Court Says Context Supports Use of Discounts in Buyout From Shareholder Oppression

State high court upholds trial court’s use of DLOM and minority discount in buyout of minority interest resulting from shareholder oppression; court says there is no “fixed set of factors” trial court must consider for fair value calculation; “context is crucial” and here justified discounts.

Asset-based appraisal unsuitable for fair value determination, court says

In a bitter fight between siblings over the buyout of the minority shareholder’s interest in a successful construction business, the trial court found the asset-based valuation the majority shareholder’s expert proposed was fatally flawed for at least two reasons.

R.D. Clark & Sons, Inc. v. Clark

Trial court’s fair value determination in buyout dispute involving family business withstands appeal, including decision not to tax affect or apply majority and minority discounts; appellate court finds there is no controlling state law on the issues and upholds trial court’s findings on facts.

Courts Reject Tax Affecting and Use of Discounts in Connecticut Buyout Dispute

Trial court’s fair value determination in buyout dispute involving family business withstands appeal, including decision not to tax affect or apply majority and minority discounts; appellate court finds there is no controlling state law on the issues and upholds trial court’s findings on facts.

Court Says Asset Approach ‘Is Simply an Improper Method’ in Present Appraisal Proceeding

Appellate court upholds trial court’s finding that majority shareholder breached fiduciary duty to minority shareholder and buyout order; trial court performed careful valuation analysis finding defense expert’s asset-based approach was “simply an improper method of valuation in the present case.”

Linde v. Linde

Appellate court upholds trial court’s finding that majority shareholder breached fiduciary duty to minority shareholder and buyout order; trial court performed careful valuation analysis finding defense expert’s asset-based approach was “simply an improper method of valuation in the present case.”

Puklich v. Puklich

In buyout dispute related to various family businesses, including auto dealership, high court finds trial court was authorized to adjust value finding to account for majority shareholder’s oppressive conduct; case law supported rejection of discounts in valuing minority shareholder’s interest.

High Court Approves of Trial Court’s Rejection of Discounts in Fair Value Determination

In buyout dispute related to various family businesses, including auto dealership, high court finds trial court was authorized to adjust value finding to account for majority shareholder’s oppressive conduct; case law supported rejection of discounts in valuing minority shareholder’s interest.

Court Says ‘Fair Value’ Under State Shareholder Oppression Law Precludes Discounts

In shareholder oppression suit, court clarifies meaning of “fair value” under applicable statutory framework; court cautions not to conflate “fair value” with “fair market value”; in drafting statute, state legislature explicitly and implicitly conveys its rejection of discounting, court says.

Kolwe v. Civil and Structural Engineers, Inc.

In shareholder oppression suit, court clarifies meaning of “fair value” under applicable statutory framework; court cautions not to conflate “fair value” with “fair market value”; in drafting statute, state legislature explicitly and implicitly conveys its rejection of discounting, court says.

Appellate Court Upholds Use of Risk Discount in Fair Value Determination

In buyout dispute, appellate court upholds trial court’s valuation of company, which applies company-specific risk discount related to uncertain extension of company’s key contract but does not deduct value of personal goodwill attributable to remaining members.

Saltzer v. Rolka

In buyout dispute, appellate court upholds trial court’s valuation of company, which applies company-specific risk discount related to uncertain extension of company’s key contract but does not deduct value of personal goodwill attributable to remaining members.

Court Clarifies Application of Rule 703 to Expert Testimony

Court upholds lower court ruling that there was no mismanagement of corporate assets; plaintiff failed to show excessive officer compensation and was properly precluded from using testifying expert to introduce another appraiser’s report on excessive rent.

Springer v. Library Store

Court upholds lower court ruling that there was no mismanagement of corporate assets; plaintiff failed to show excessive officer compensation and was properly precluded from using testifying expert to introduce another appraiser’s report on excessive rent.

Kassab v Kasab

In determining the fair value of petitioner’s interest in two family businesses that hold real estate, New York court (Second Department) adopts expert’s decision not to apply marketability discount, noting valuation “already relies upon market exposure.”

Court Adopts DLOM-Free Valuation of Realty Holding Company

In determining the fair value of petitioner’s interest in two family businesses that hold real estate, New York court (Second Department) adopts expert’s decision not to apply marketability discount, noting valuation “already relies upon market exposure.”

New Jersey Court Finds Defendant’s Actions Justify DLOM in Forced Buyout

In New Jersey fair value determination, following precedent, court finds defendant’s conduct justifies use of a marketability discount because he was oppressing shareholder who created “extraordinary circumstances” necessitating forced buyout; court rejec ...

Court Dismisses S Corp Tax Argument in Fair Value Buyout

In statutory fair value proceeding, court adopts income-based approach reconciling key differences in expert analyses regarding historical earnings period, tax rates, and normalization for intercompany transactions; court rejects market analysis.

Court Dismisses S Corp Tax Argument in Fair Value Buyout

In statutory fair value proceeding, court adopts income-based approach reconciling key differences in expert analyses regarding historical earnings period, tax rates, and normalization for intercompany transactions; court rejects market analysis.

Matter of Digeser v. Flach

Income approach, capitalization rate, expert testimony, valuation methods, fair value, minority oppression, statutory appraisal, S corporation, C corporation, normalization, market-based approach, comparable transactions ...

New Jersey Court Finds Defendant’s Actions Justify DLOM in Forced Buyout

In New Jersey fair value determination, following precedent, court finds defendant’s conduct justifies use of a marketability discount because he was oppressing shareholder who created “extraordinary circumstances” necessitating forced buyout; court rejec ...

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