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.
Chancery Relies on DCF Where Deal Process Is Not ‘Dell Compliant’
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.
Verition Partners Master Fund Ltd. v. Aruba Networks, Inc. (Aruba I)
In statutory appraisal proceeding, Court of Chancery says unaffected market price provides “direct evidence of the collective view of market participants” as to target’s fair value whereas deal-price-minus-synergies is a less reliable “indirect measure.”
Court Calls Stock Price ‘Most Straightforward’ Indicator of Fair Value
In statutory appraisal proceeding, Court of Chancery says unaffected market price provides “direct evidence of the collective view of market participants” as to target’s fair value whereas deal price minus synergies is a less reliable “indirect measure."
In re EM Lodgings, LLC
In granting creditor’s stay relief motion, court averages competing expert valuations and finds debtor has no equity in contested hotel; court says value gap is result of experts’ legitimate disagreements over hotel’s future performance as reflected in inputs for DCF-based analyses.
Court Accords Equal Weight to Competing DCF-Based Hotel Valuations
In granting creditor’s stay relief motion, court averages competing expert valuations and finds debtor has no equity in contested hotel; court says value gap is result of experts’ legitimate disagreements over hotel’s future performance as reflected in inputs for DCF-based analyses.
City of Hialeah Emples. Ret. Sys. v. FEI Co.
Court rejects dissenting shareholder’s proxy challenge, finding board member statements about management projections are protected under applicable act’s safe harbor provision; also, court says financial advisor’s fairness opinion did not double count for risk in underlying DCF analysis.
Financial Advisor’s Fairness Opinion Not Materially Misleading
Court rejects dissenting shareholder’s proxy challenge, finding board member statements about management projections are protected under applicable act’s safe harbor provision; also, court says financial advisor’s fairness opinion did not double count for risk in underlying DCF analysis.
Court Validates Use of IPO Valuation in Fair Value Proceeding
In shareholder suit involving pharmaceutical startup with uncertain prospects, appeals court upholds trial court’s rejection of expert testimony based on “traditional” valuation methods in favor of noncontemporary IPO valuation to determine fair value.
Dell, Inc. v. Magnetar Global Event Driven Master Fund Ltd. (II)
High Court rejects Chancery’s decision to disregard deal price entirely in favor of court’s DCF analysis; record belies Chancery’s finding that deal price undervalued company stock, High Court says, urging adoption of deal price as fair value on remand.
Delaware Supreme Court Rebukes Chancery for Disregarding Deal Price
High Court rejects Chancery’s decision to disregard deal price entirely in favor of court’s DCF analysis; record belies Chancery’s finding that deal price undervalued company stock, High Court says, urging adoption of deal price as fair value on remand.
Trustee’s Attack on Merger Projections Fails to Resonate With Court
Court says trustee fails to show debtor was insolvent under any applicable financial condition tests; contemporaneous industry analysis and valuations by financing banks belie claim that management projections in support of merger were unreasonable.
Blind Reliance on Client Data and Wide-Ranging Values Gut New Venture Valuation
In a securities fraud action, appeals court upholds class certification; trial court did not err when it found direct evidence of price impact by way of event study was not necessary to show market efficiency where there was strong indirect evidence.