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Flaws in North Carolina Court’s Appraisal of Reynolds American

The wrong valuation date, a faulty reliance on other cases and the disregard of projections highlight the court’s opinion in a shareholder dissent case involving two tobacco giants.

In a crunch, court adopts company’s DCF model as fair value indicator

In a statutory appraisal action prompted by the 2016 buyout of minority shareholders by the controller of a private company, the Delaware Court of Chancery recently found there was no meaningful market-based evidence of fair value and neither expert opinion, based on standard valuation methods, was “wholly reliable.”

Kruse v. Synapse Wireless, Inc.

In appraisal action arising out of controller’s buyout of minority stockholders, court finds there is no reliable market evidence as to target’s fair value on merger date; none of expert valuations are “wholly reliable,” but one expert’s DCF analysis offers a “proportionately reliable conclusion.”

Lacking Any Wholly Reliable Indicators of Fair Value, Court Adopts Respondent's DCF Model

In appraisal action arising out of controller's buyout of minority stockholders, court finds there is no reliable market evidence as to target's fair value on merger date; none of expert valuations are "wholly reliable," but one expert's DCF analysis offers a "proportionately reliable conclusion."

North Carolina court looks to deal price for fair value in tobacco merger

The importance of Delaware appraisal jurisprudence beyond state borders was on display in a recent fair value decision out of North Carolina related to a merger involving the tobacco giant Reynolds.

Reynolds American Inc. v. Third Motion Equities Master Fund Ltd.

In appraisal action involving merger of public (tobacco) company, court, guided by key Delaware court decisions, says deal price best reflects fair value and represents upper limit; contemporaneous valuations based on comparable companies, precedent transactions, and DCF support use of deal price.

North Carolina Court Says Deal Price Represents Upper Limit of Tobacco Company’s Fair Value

In appraisal action involving merger of public (tobacco) company, court, guided by key Delaware court decisions, says deal price best reflects fair value and represents upper limit; contemporaneous valuations based on comparable companies, precedent transactions, and DCF support use of deal price.

Creative Destruction and the Perpetual Growth Assumption

In determining terminal value in a discounted cash flow (DCF) valuation, it is usually assumed that a mature company will grow at a constant rate in perpetuity. The impact of creative destruction and disruptive innovation interrupts and reverses historical growth patterns. If to the extent that the assumption of constant perpetual growth is invalid, the commonly used growth model in DCF analyses will overstate terminal value and cause overvaluations. The perpetual growth concept needs to ...

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