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2018 Key Business Valuation and Damages Cases

Choices for the most interesting and pivotal court cases of 2018 involving business valuation issues.

New study of M&A deals spotlights fairness opinions

A study of about 2,000 M&A deals from 2006 to 2016 suggests that acquirers should pay closer attention to the fairness opinions third-party analysts provide.

‘Real-World Market Evidence’ Does Not Support Dissenters’ Damages Claim, Chancery Says

Chancery says plaintiffs proved directors breached fiduciary duties and duty to disclose but failed to prove damages; court rejects plaintiff experts’ DCF analysis, noting problematic projections and beta; “real-world market evidence” shows company was not worth more than deal price.

In re PLX Tech. Stockholders Litig.

Chancery says plaintiffs proved directors breached fiduciary duties and duty to disclose but failed to prove damages; court rejects plaintiff expert's DCF analysis, noting problematic projections and beta; “real-world market evidence” shows company was not worth more than deal price.

Analysis of appraisal rights

An analysis that compares appraisal rights in the U.S., France, and Romania is in the University of Pennsylvania Journal of Business of Law.

Aruba Networks: Should Appraisals Rely on Unaffected Market Price?

Delaware appraisal decisions in recent years have effectively endorsed the concept that the price paid in an arm’s-length transaction is “fair value” when there has been a “robust” sales process. This article examines the “troubling” ruling in which the court based its appraisal solely on the unaffected market price.

Stale Fairness Opinions in Related Party Transactions Should Be Updated

It is common practice for proxy statements to contain fairness opinions that are dated weeks (or months) prior to the mailing date. Typically, they are not reviewed in the interim, which can be a problem.

Deal price vs. the DCF: Two new Delaware cases grapple with ‘transformed’ fair value landscape

With the landmark rulings in DFC Global and Dell, the Delaware Supreme Court has given its “full-throated endorsement” of market efficiencies by declaring the deal price (minus synergies) a strong indicator of statutory fair value, say two new statutory appraisal opinions from the Court of Chancery.

Delaware’s Unwarranted Assumption That Capex Should Equal Depreciation in a DCF Model

Delaware fair value proceedings have predominantly adopted the erroneous assumption that capital expenditures should equal the sum of depreciation and amortization in determining terminal value. Here’s an analysis of these flawed decisions.

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.

Delaware Chancery defends use of market price, citing recent high court rulings

A few months ago, in a statutory appraisal case, the Delaware Court of Chancery made news when it used the unaffected market price as the indicator of fair value.

Appraisal rights in M&A

In a recent presentation by attorneys from Cadwalader, it’s clear that appraisal rights continue to be an important topic in the M&A world.

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.

BVU News and Trends May 2018

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

Appraisal rights in the U.S. and EU

In the U.S., there has been a surge of appraisal petitions and appraisal arbitrage, but this is not the case in the EU, according to a paper by Alexandros Seretakis (Trinity College, Dublin).

Briefing examines recent appraisal decisions

Since the Delaware Supreme Court issued its landmark Dell appraisal decision (see prior coverage), the Delaware courts have issued three appraisal decisions—Aruba, AOL, and SWS—which, unlike Dell, assigned no weight to the deal price in setting fair value below the deal price.

Court of Chancery disregards deal price where sales process is not ‘Dell compliant’

Recent rulings from the Delaware Supreme Court make it seem as if the discounted cash flow analysis has lost its top ranking among valuation methodologies in statutory appraisals involving publicly traded companies. Not exactly.

New paper examines statutory rights of appraisal in Delaware

“The Anna Karenina principle is alive and well in the Delaware courts,” according to a paper that explores statutory rights of appraisal and the search for the sometimes “elusive” concept of fair value.

Problematic process causes Chancery to use DCF as fair value indicator

The discounted cash flow analysis is not dead yet in the Delaware Court of Chancery.

Court of Chancery exalts stock price as most accurate indicator of fair value

The Delaware Court of Chancery recently had an opportunity to put into practice the directives the state’s high court had issued in DFC Global and Dell in terms of calculating fair value in a statutory appraisal proceeding.

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.”

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