A Channel Analysis Is Key When Valuing a Fast-Food Restaurant
There has been a seismic shift in the operations of limited-service restaurants since the pandemic—and there’s no sign of reverting. Channels of revenue have been upended. Therefore, an analysis along these lines is important when valuing these entities, advises an expert in this space.
The CEIV Is Gone But the MPF Will Endure—Here’s an Example
The Certified in Entity and Intangible Valuations (CEIV) credential has been discontinued, but the Mandatory Performance Framework (MPF) will continue to be used. In fact, a revision is expected to make it more streamlined. Here are its guidelines for documenting management projections that are worthy of repurposing.
Barnes v. Barnes
The trial for this divorce case was extended almost eight months because the parties had assured the court it would be a three-day trial and it took four days. The fourth day was almost eight months after the end of the third day of trial. As a result, the husband argued that the value of his business should have been updated and consideration given to the effect of splitting the business’s real estate from the operations of the business. The appellate court noted that this issue had not been raised at trial and was, therefore, not appealable. Other issues not related to the business were issues for the appellate court.
Tennessee Appeals Court Affirms Trial Court Valuation and Trial Court’s Skepticism of Husband’s ‘Projections’
The trial for this divorce case was extended almost eight months because the parties had assured the court it would be a three-day trial and it took four days. The fourth day was almost eight months after the end of the third day of trial. As a result, the husband argued that the value of his business should have been updated and consideration given to the effect of splitting the business’s real estate from the operations of the business. The appellate court noted that this issue had not been raised at trial and was, therefore, not appealable. Other issues not related to the business were issues for the appellate court.
Confident Projections: Knowing & Implementing FP&A Methodology Into Projections
Financial experts use projections in business valuations, economic damages, and a multitude of other scenarios in practice. Understanding the source of data is one step, but assessing the quality of the data along with projections is critical for data quality as well as assessing the sufficiency and accuracy of management’s projections. Learn how to understand and assess the quality of projections and the quality of the professionals providing those inputs by joining Josh Shilts, who ...
Internal billings trigger M&A damages; GPCM prevails
A case in Delaware Chancery Court shows that the court will not award damages from an M&A transaction gone bad when the calculations are based on speculative lost synergies.
Gore v. Gore
The key element in the appeal of this divorce case revolved around the valuation of the wife’s business, selling dietary supplements online. The wife failed to produce in a timely manner the documents the husband requested. She also failed to timely declare an expert who could testify as to the value of her business. “Wife appealed the circuit court’s award of monetary sanctions and the court’s exclusion of her and her expert’s testimony regarding her company’s valuation, as well as her attempts to testify regarding the value of her business. Husband cross-appealed the court’s distribution of marital property and the resultant monetary award.”
Appellate Court (Maryland) Affirms Trial Court’s Decision to Exclude Testimony of Wife’s Expert
The key element in the appeal of this divorce case revolved around the valuation of the wife’s business, selling dietary supplements online. The wife failed to produce in a timely manner the documents the husband requested. She also failed to timely declare an expert who could testify as to the value of her business. “Wife appealed the circuit court’s award of monetary sanctions and the court’s exclusion of her and her expert’s testimony regarding her company’s valuation, as well as her attempts to testify regarding the value of her business. Husband cross-appealed the court’s distribution of marital property and the resultant monetary award.”
Chancery Court Determines Value of Shares by Applying Average of GPCM and DCF Methodologies
In a long and complex opinion, the Delaware Court of Chancery determined the value per share of stock in a former stockholder’s appraisal action. The per-share value was reached by ascribing equal weight to adjusted versions of the comparable companies analysis (GPCM) the stockholder advanced and the discounted cash flow analysis the company advanced. The other methodologies were rejected. The use of the GPCM represented the first use of that method in some years.
HBK Master Fund L.P. v. Pivotal Software, Inc.
In a long and complex opinion, the Delaware Court of Chancery determined the value per share of stock in a former stockholder’s appraisal action. The per-share value was reached by ascribing equal weight to adjusted versions of the comparable companies analysis (GPCM) the stockholder advanced and the discounted cash flow analysis the company advanced. The other methodologies were rejected. The use of the GPCM represented the first use of that method in some years.
NetApp, Inc. v. Cinelli
The defendant hid improper recording of revenue from use of internal software in unaudited financial statements that were represented to be GAAP-compliant. The defendant was held to have breached the merger/sale contract in a manner that resulted in fraud. The plaintiff was awarded damages. The court accepted the expert’s GPCM as the most “responsible estimate” of the private company’s value as it was presented to the plaintiff.
Seller Breached Terms of Merger Agreement Including That Statements Were GAAP-Compliant—Expert’s GPCM Accepted
The defendant hid improper recording of revenue from use of internal software in unaudited financial statements that were represented to be GAAP-compliant. The defendant was held to have breached the merger/sale contract in a manner that resulted in fraud. The plaintiff was awarded damages. The court accepted the expert’s GPCM as the most “responsible estimate” of the private company’s value as it was presented to the plaintiff.
Calculating But-For Profits
Do you feel like being asked to calculate but-for-profits feels like an engagement in another dimension? Calculating the position the harmed party would have been in “but for” the alleged acts is an advanced skill for appraisers. Join expert and contributing author to The Comprehensive Guide to Economic Damages, Stacey Udell, for a discussion of different strategies to determine net lost profits including the critical step of removing incremental costs that did not occur. Every ...
A Model for Forecasting a Multiple-Location, Growing Business
Veteran valuation expert Gary Trugman (Trugman Valuation) had an engagement that involved a business that operated a franchise with multiple locations—and was required to open a lot more. This article shows in detail how he did the forecasting.
BV News and Trends March 2023
A monthly roundup of key developments of interest to business valuation experts.
O’Mahony v. Whiston
In a case of disputes among the owners of an Irish soccer bar in New York City, the court awarded economic damages and punitive damages after the controlling owners took proceeds of a lease buyout of the bar’s prior location to establish a new identical bar in a new location while cutting out the minority owners from the new bar. Using assets of the old corporation and thereby misappropriating a corporate opportunity of the old corporation, they started a new identical bar (including the name) in a new location in a corporation the control owners set up.
New York Court Awards Lost Corporate Opportunity and Punitive Damages in Restaurant-Related Case
In a case of disputes among the owners of an Irish soccer bar in New York City, the court awarded economic damages and punitive damages after the controlling owners took proceeds of a lease buyout of the bar’s prior location to establish a new identical bar in a new location while cutting out the minority owners from the new bar. Using assets of the old corporation and thereby misappropriating a corporate opportunity of the old corporation, they started a new identical bar (including the name) in a new location in a corporation the control owners set up.
Valuation impacts of the Inflation Reduction Act
Expect to see increased scrutiny on business valuations for tax purposes as a result of the Inflation Reduction Act of 2022 (IRA).
VeroBlue Farms USA Inc. v. Wulf
In this complex case, which the district court judge called “a doozy,” the subject of this subissue was a motion by the defendants to exclude the testimony of the plaintiff’s (VeroBlue Farms USA Inc.) damages expert, Brandi Kleinman, CPA/CFF. The district court judge assigned the case to the court’s magistrate judge for recommendation of decision. The motion alleged a multitude of issues and flaws with the opinions of Kleinman. The magistrate, despite these alleged issues and flaws, denied the motion, thereby allowing Kleinman to testify.
U.S. District Court (Texas) Allows Testimony of Damages Expert Despite Alleged ‘Flawed Opinions’
In this complex case, which the district court judge called “a doozy,” the subject of this subissue was a motion by the defendants to exclude the testimony of the plaintiff’s (VeroBlue Farms USA Inc.) damages expert, Brandi Kleinman, CPA/CFF. The district court judge assigned the case to the court’s magistrate judge for recommendation of decision. The motion alleged a multitude of issues and flaws with the opinions of Kleinman. The magistrate, despite these alleged issues and flaws, denied the motion, thereby allowing Kleinman to testify.
Recession tops Kroll’s 10 trends to watch in 2023
The new year “promises to be a tougher ride for most businesses, investors and consumers globally, but there is always opportunity in volatility,” according to the Kroll Institute in its latest report, “10 Trends to Watch Heading Into 2023.”
Embracing the Hockey Stick: Alternative Approaches to Formulating and Assessing Projections
The question of projections may be one of the most challenging elements of a business or intellectual property appraisal. Most business appraisers will be placed in a position of assessing projections, including projections another appraiser provided. Join Michael Blake for an exploration of the quantitative and empirical methodologies for creating and/or validating projections. As a result of this class, you will gain exposure to potentially new tools to help make your projections more robust and ...
Valuation Considerations in High Inflationary Environments
With inflation at its highest level since the Great Inflation, valuation analysts will have to consider macroeconomic factors that have not been present in the U.S. economy in over 20 years.
Accounting for Inflation in the Income Statement Forecast
An example from an actual engagement that demonstrates the manner in which inflation can impact a valuation.
Delaware Chancery Court Cites Differences in Cash-Flow Assumptions as Cause for Large Discrepancy in Value
In this appraisal action to determine fair value, petitioner Ramcell Inc. exercised its appraisal rights in asking for a statutory appraisal of the value of its 155 shares of Jackson Cellular Telephone Co. Inc. The respondent, Alltel Corp. (dba Verizon Wireless), had converted the 155 shares at a value of $2,963 per share. “Respondent’s expert opines that Jackson’s per-share value was $5,690.92 at the time of the merger. Petitioner’s expert has offered two appraisal ranges, opining that, at the high end, Jackson’s per-share value was $36,016 on the merger date.” Both parties agreed that the DCF method should be the sole method for determining the value. The Delaware Chancery Court, using that method, determined the fair value of each share at $11,464.57. The court noted that the disparity in the parties’ valuations was due to disagreements as to the inputs to the DCF model and how they should be calculated.