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A Method for Quantifying Contract Renewal Risk in Valuations

A formula that explicitly incorporates the assumed probability of renewal in the valuation of businesses that depend on contracts, licenses, or permits for their future cash flows; it builds on the Gordon growth model and the formula for the future value of a growing annuity.

Tennessee embraces ‘modern’ valuation methods in fair value determination

In a key valuation decision, the Tennessee Supreme Court recently overruled precedent on how to determine fair value in a dissenting shareholder suit.

Test-drive a formula for quantifying the risk of contract renewal

When valuing a business that depends on contracts, licenses, or permits for its future cash flows, how do you take into account the risk of nonrenewal?

DOL urges court to uphold judgment against trustee in Brundle ESOP litigation

In the ongoing Brundle v. Wilmington Trust ESOP saga, which is now in the appeals stage, the Department of Labor recently filed an amicus brief in support of the district court’s $29.8 million judgment against the ESOP trustee. The case arose out of a plan participant’s claim that the ESOP trustee breached its fiduciary duties to the plan by causing the ESOP to pay more than fair market value for the employer’s stock.

In re Appraisal Solera Holdings, Inc.

In an appraisal proceeding, the Chancery finds the deal price minus synergies provides the best evidence of fair value; court says there was an efficient market and the sales process, though not perfect, was able to deliver the value generated in an arm’s-length transaction.

Delaware Chancery Says Reasonably Sound Sales Process Delivered Fair Value

In an appraisal proceeding, the Chancery finds the deal price minus synergies provides the best evidence of fair value; court says there was an efficient market and the sales process, though not perfect, was able to deliver the value generated in an arm’s-length transaction.

Blueblade Capital Opportunities LLC v. Norcraft Cos.

Chancery rejects deal price as indicator of fair value, citing problematic sales process, and rejects use of unaffected trading price, citing company’s lack of trading history; court instead relies on its own DCF analysis, drawing on the most credible aspects of each expert’s analysis.

Flawed Sales Process Has Chancery Revert to DCF to Determine Fair Value

Chancery rejects deal price as indicator of fair value, citing problematic sales process, and rejects use of unaffected trading price, citing company’s lack of trading history; court instead relies on its own DCF analysis, drawing on the most credible aspects of each expert’s analysis.

Tips and Takeaways From the NYSSCPA BV Conference

BVU attended the annual business valuation conference of the New York State Society of CPAs (NYSSCPA) on May 21 in New York City. As usual, it was an excellent conference, and here are a few takeaways from the sessions.

Important bankruptcy ruling on how to value oil and gas assets

Valuing oil and gas assets requires special expertise, as is evident from a recent bankruptcy ruling that includes a thorough examination of the parties’ valuation evidence.

Athlon Sports Communications, Inc. v. Duggan (II)

Court overrules precedent requiring exclusive use of Delaware block method to determine fair value in dissenting shareholder cases; trial courts may use other, more “modern” methods, including forward-looking DCF analysis, state high court says and remands for reevaluation of earlier ruling.

Delaware Block Method No Longer Mandatory in Tennessee Fair Value Proceedings

Court overrules precedent requiring exclusive use of Delaware block method to determine fair value in dissenting shareholder cases; trial courts may use other, more “modern” methods, including forward-looking DCF analysis, state high court says and remands for reevaluation of earlier ruling.

Tips and takeaways from the NYSSCPA BV event

BVWire attended the annual business valuation conference of the New York State Society of CPAs (NYSSCPA) on May 21 in New York City.

The Use of Financial Projections in Solvency Opinions

Financial projections are often a key input to the financial models used to assess solvency, but projections prepared by management or its professional advisors are sometimes overly optimistic. Here’s how to identify whether projections are reasonable and to assess the level of risk.

BVU News and Trends June 2018

A monthly roundup of key developments of interest to business valuation experts.

Verition Partners Master Fund Ltd. v. Aruba Networks, Inc. (Aruba II)

Court of Chancery denies petitioners’ motion for reargument, finding that, in light of high court’s Dell and DFC decisions, the decision to use the unaffected market price as the fair value indicator was not so “ridiculous” or “absurd” as to indicate the Court of Chancery misapprehended the law.

Chancery Defends Use of Market Price Citing Recent High Court Rulings

Court of Chancery denies petitioners’ motion for reargument, finding that, in light of high court’s Dell and DFC decisions, the decision to use the unaffected market price as the fair value indicator was not so “ridiculous” or “absurd” as to indicate the Court of Chancery misapprehended the law.

New IRS guidance on interest expense limits

The Treasury Department and the IRS have issued guidance (Notice 2018-28) for computing the business interest expense limitation under the Tax Cuts and Jobs Act.

Extra cash flow from tax reform to be invested

Much of the windfall savings companies are expecting from the new tax law will be used to increase domestic investment, according to a Deloitte survey of CFOs.

In re Tesla Motors Stockholder Litig.

Court of Chancery says Tesla dissenting shareholders allege sufficient facts to show company CEO, Elon Musk, was a controlling shareholder, despite holding a minority interest; court allows breach of fiduciary claims concerning acquisition of related company to proceed.

Court Allows Tesla Dissenting Shareholder Suit to Go Forward

Court of Chancery says Tesla dissenting shareholders allege sufficient facts to show company CEO, Elon Musk, was a controlling shareholder, despite holding a minority interest; court allows breach of fiduciary claims concerning acquisition of related company to proceed.

Court Credits Debtor’s Asset Valuations but Rejects Chapter 11 Plan

Court finds debtor is hopelessly insolvent; court values two types of oil and gas assets under NAV and precedent transaction analyses, respectively, finding, in terms of NAV analysis, debtor’s expert is more credible on issues of pricing, forecasting, risking, and predicting costs.

In re Breitburn Energy Partners LP

Court finds debtor is hopelessly insolvent; court values two types of oil and gas assets under NAV and precedent transaction analyses, respectively, finding, in terms of NAV analysis, debtor’s expert is more credible on issues of pricing, forecasting, risking, and predicting costs.

Takeaways From the AICPA FVS Conference

We attended many of the sessions at the AICPA’s 2017 Forensic and Valuation Services conference in Las Vegas along with over 1,000 attendees and found no shortage of tips, ideas, and advice.

In re AOL Inc.

In statutory appraisal, court finds sales process was not “Dell compliant” and declines to assign any weight to deal price; court agrees with parties’ experts that DCF best captures fair value on valuation date and arrives at final value below deal price.

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