BV News and Trends January 2025
A monthly roundup of key developments of interest to business valuation experts.
BV News and Trends December 2024
A monthly roundup of key developments of interest to business valuation experts.
Celsius Holdings, Inc. v. Strong Arm Productions USA, Inc.
In determining the amount of damages in this contract dispute, the Florida Appellate Court dealt with the appropriate date of value of stock of the defendant in determining the appropriate amount of damages. The date of value was an issue that arose in a number of cases. The court rejected the use of the date of trial but remanded for the court to determine whether to use the date of the breach of contract or the date at which restrictions on the sale of stock lapsed. While the court touched on the restriction issue, no evidence that a value at the date of breach, which included the impact of the restrictions on value, was presented.
Florida Appellate Court Remands for Determination of the Proper Date of Value in a Damages Case
In determining the amount of damages in this contract dispute, the Florida Appellate Court dealt with the appropriate date of value of stock of the defendant in determining the appropriate amount of damages. The date of value was an issue that arose in a number of cases. The court rejected the use of the date of trial but remanded for the court to determine whether to use the date of the breach of contract or the date at which restrictions on the sale of stock lapsed. While the court touched on the restriction issue, no evidence that a value at the date of breach, which included the impact of the restrictions on value, was presented.
Short Takes and Tips From the Annual ASA Conference
There was a lot of interesting information to be found both inside the sessions and at the various networking events at the recent ASA Annual Conference in Portland, Ore.
BV News and Trends November 2024
A monthly roundup of key developments of interest to business valuation experts.
Stout warns against using simple benchmarks for DLOM
During a recent free BVR webinar, Patrick Polomsky, who is with Stout, where he maintains the Stout Restricted Study database, explained the ins and outs of the study and noted that the typical method analysts have used to estimate a discount for lack of marketability (DLOM) is not as comprehensive as it should be, that is, simply looking at the averages of the Stout study and/or other studies to estimate the DLOM.
DOL to ‘heat up’ regs for ESOP valuations
Long-awaited regs from the Department of Labor on ESOP valuations are a “forthcoming attraction that will heat up a fair amount of our resources for the fall,” said Jeff Turner, acting deputy director of the Office of Regulations and Interpretations at the Employee Benefits Security Administration (EBSA), reports the American Society of Pension Professionals & Actuaries (ASPPA).
BV News and Trends October 2024
A monthly roundup of key developments of interest to business valuation experts.
Court-appointed attorney can’t testify on stock gift valuation
In a Hawaii estate matter, one of the founders of the Foodland grocery chain made lifetime gifts of company stock to some of her children.
Jacobs v. Akademos, Inc.
The controlling shareholder of this nearly bankrupt company, which operated online bookstores for colleges and universities, finally threw in the towel and accepted a last-ditch merger, which still left it under water. Some common shareholders asked for a fair value valuation of their common shares, which the court determined to be zero dollars per share. The case emphasized the problems with unreliable projections (i.e., forecasts) and criticized the use of 409A valuations in determining fair value. The case is an excellent tutorial of issues to be considered in determining fair value.
Delaware Chancery Court Determines a Zero Value for Common Stock Shares and Determines That the Merger Triggering the Fair Value Determination Was Fair
The controlling shareholder of this nearly bankrupt company, which operated online bookstores for colleges and universities, finally threw in the towel and accepted a last-ditch merger, which still left it under water. Some common shareholders asked for a fair value valuation of their common shares, which the court determined to be zero dollars per share. The case emphasized the problems with unreliable projections (i.e., forecasts) and criticized the use of 409A valuations in determining fair value. The case was an excellent tutorial of issues to be considered in determining fair value.
Another ESOP valuation mess
Pilots for Western Global Airlines, a freight carrier, reached a $14.5 million settlement to end a lawsuit alleging that the owners and fiduciaries overvalued the company by 20 times its actual worth when setting up its employee stock ownership plan (ESOP).
Sullivan v. Loden (II)
The U.S. District Court in this case excluded the value of an attorney who was appointed in a related state probate case and testified that the defendant’s valuations were unreliable. The district court determined that the proposed witness was not qualified to testify as to the efficacy of valuations. This case concluded that just because a proposed witness was an “attorney” “respected” as an estate expert did not make him or her qualified under Rule 702 to testify about business valuations when the proposed witness was not qualified in business valuation.
U.S. District Court (Hawaii) Excludes Testimony on Business Value From an Attorney Who Has No Valuation Skills
The U.S. District Court in this case excluded the value of an attorney who was appointed in a related state probate case and testified that the defendant’s valuations were unreliable. The district court determined that the proposed witness was not qualified to testify as to the efficacy of valuations. This case concluded that just because a proposed witness was an “attorney” “respected” as an estate expert did not make him or her qualified under Rule 702 to testify about business valuations when the proposed witness was not qualified in business valuation.
A Very Engaging Audience at the ASA ESOP Virtual Conference
Speakers answered a lot of audience questions at the recent ASA ESOP Virtual Conference about feasibility studies, the valuation of transaction-related items (such as warrants, earnouts, etc.), the nuances of ESOP-related valuation reports, and upcoming proposed regs from the Department of Labor.
BV News and Trends September 2024
A monthly roundup of key developments of interest to business valuation experts.
Global BVU News and Trends September 2024
Business valuation news from a global perspective.
Estate of Anne Milner Fields v. Comm'r
Importance: While this case was a memorandum decision and did not, therefore, set precedent, it was still a warning to estate planners that last-minute transfers of property from an individual prior to death must have real, verifiable, and justifiable nontax purposes. The Tax Court noted that the timeline (i.e., shortly before the decedent’s death) cast significant doubt on the transactions.
Transfers of Decedent’s Properties by Nephew Shortly Before Death Were Not a Bona Fide Sale for Adequate and Full Consideration
While this case was a memorandum decision and did not, therefore, set precedent, it was still a warning to estate planners that last-minute transfers of property from an individual prior to death must have real, verifiable, and justifiable nontax purposes. The Tax Court noted that the timeline (i.e., shortly before the decedent’s death) cast significant doubt on the transactions.
Comments due soon on the revisions to the cheap stock guide
Comments are due soon—by September 20—on a working draft of two updated chapters from the AICPA Valuation of Privately-Held Company Equity Securities Issued as Compensation guide.
ESOP Experts Worried Over Upcoming DOL Regs on Valuations
At the recent ASA ESOP Virtual Conference, a panel talked with some concern about upcoming proposed regulations from the Department of Labor on how to establish the fair market value of shares of a business to be acquired by an ESOP. They urged the audience to make their voices heard when the comment period opens (no word yet) and talked about recourse strategies if the final regs are problematic.
AICPA Wants Feedback on Partial Revisions to Cheap Stock Guide
A working draft of two updated chapters from the AICPA Valuation of Privately-Held Company Equity Securities Issued as Compensation Guide (the “cheap stock” guide) has been issued, and the AICPA would like some feedback by September 20. This is part of a broader forthcoming update of the 2013 edition of the guide.
Have you commented on the revisions to the cheap stock guide?
Comments are due by September 20 on a working draft of two updated chapters from the AICPA Valuation of Privately-Held Company Equity Securities Issued as Compensation guide.
DOL prevails in ESOP valuation lawsuit
The former owners of the company behind those ubiquitous Cruise America RVs must not be happy campers after a recent ruling from an Arizona court. The court found that they violated ERISA and breached their fiduciary duties when setting up an ESOP that the DOL said overpaid them for their shares.