Business Valuation Update
- How to Review a Report’s Valuation Methodology
- Ideas for Solving Two Problems in the BV Profession
- How Do Your Firm’s Benefits Stack Up?
- Using Rule of Thumb Data to Uncover Cooked Books
Using Company-Specific Risk in the Delaware Chancery Court
For Delaware courts, discounted cash flow analysis has become the principal valuation methodology for determining going concern value of an entity. In Cede & Co. v. JRC Acquisition Corp., Civil Action No. 18658-NC, 2004 WL 286963, at 2 (Del. Ch. Feb. 10 ...
Grabowski Identifies Seven Changes to the ‘Craft’ of Business Valuation
“I have been blessed to have found a great profession to be part of,” Roger Grabowski told over 500 attendees at the closing keynote session at NACVA’s 15th Annual Consultants’ Conference in Las Vegas in mid June.
Was the DE Chancery Too Quick to Dismiss the Build-Up Method?
In response to BVU’s coverage of In re Orchard Enterprises, Ted Israel (Eckhoff Accountancy) finds much to compliment in the Chancery Court’s opinion, but also two major points to criticize regarding the court’s characterization of the build-up method (BU ...
Quantifying Company-Specific Risk: A New, Empirical Framework With Practical Applications
In this article, the authors have refined their earlier work1 by providing a detailed example of how to select a company-specific risk premium (CSRP) for a privately held company using benchmark CSRPs derived from guideline publicly traded companies.
Lessons on Using the Guideline Public Company Method From the Delaware Court of Chancery
Valuation-related decisions from the Delaware Court of Chancery provide important guidance to business appraisers across the country, according to Jeffrey S. Tarbell, ASA, CFA (Houlihan Lokey), who presented a case update at the most recent ASA Advanced B ...
Tax-Affecting and Beyond: Dela. Radiology Experts Discuss ‘Landmark’ Case
Eighteen! That is the precise number of minutes the minority shareholders’ forensic and valuation expert, John Mitchell, testified on direct in Delaware Open MRI Radiology,1 a “landmark” case on tax-affecting, fair value pricing, and judicial appraisal.
Highlights of 2020 Delaware Valuation Decisions
This article discusses two 2020 Supreme Court decisions and eight decisions by the Court of Chancery.
An In-Depth Look at the New D&P Valuation Handbook
The SBBI Valuation Yearbook from Morningstar Inc. and the Duff & Phelps Risk Premium Report were the two most common resources utilized by valuation professionals for estimating the cost of capital through 2013. In September 2013, Morningstar Inc. announ ...
Key Valuation Considerations for Fairness Opinions
Fairness opinions are frequently finding their way into a courtroom, so it is important to have a grasp on both the legal and financial aspects. Craig Jacobson and Richard Peil, who are both with GlassRatner Advisory & Capital Group, and attorney Jeffrey ...
It’s in There! So What Else Is Included in Your Estimated Cost of Capital?
In a long-running TV ad for spaghetti sauce during the 1980s, a pitchman repeatedly responds to inquiries about the product’s ingredients with the phrase: “It’s in there!” This response might also apply to your estimated cost of capital.
Hot BV Topics From the AICPA FVS Conference
Almost 1,000 attendees at the AICPA Forensic & Valuation Services Conference 2013 in Las Vegas learned about the latest developments in business valuation. Among the many topics discussed were new perspectives on the value of control, how valuation report ...
The Implied Private Company Pricing Model (IPCPM) Ko = (FCFF1 / P) + g
Editor’s Note: The authors have developed a model designed to be more reliable than the build-up method for estimating the cost of capital of a small privately held business. This model uses the authors’ new Implied Private Company Pricing Line 2.0 (IPCPL ...
Delaware Supreme Court: Should Market Price Conclusively Establish Fair Value?
Delaware Supreme Court declines to adopt a “bright line” rule requiring appraisal authorities to defer to the merger price in determining statutory fair value.
Delaware Chancery Confirms Preference for DCF, Distrust of Company-Specific Premium
Delaware Chancery court confirms its preference for a DCF analysis, discredits company-specific risk premium, discusses circular logic behind selection of small-firm risk premium, and rejects value adjustment for post-merger conversion to an S Corp.
Delaware Sees DCF Approach as Best for Appraisal Action
The principal issue in this appraisal action was the fair value of dissenters’ stock in Trilithic Inc. (Trilithic), a close corporation that had merged with and into another corporation of the same name.
Delaware Chancery Cobbles Capitalization of Earnings Value From Dueling Experts
Delaware Chancery Court makes substantial normalizing adjustments to capitalization of earnings values from “dueling” experts to determine fair value for fractional interests created by company’s reverse stock split.
Another ‘Must-Read’ Decision From Delaware Chancery on the DCF, Discount Rate, and More
Delaware Chancery Court confirms its preference for the DCF approach in a statutory appraisal action as well as the CAPM for calculating the discount rate and the supply-side ERP, but rejects an adjustment to the size premium to account for the latter.
Arm’s-Length Merger Price Less Synergies Equals Fair Value
The issue in this case was the fair value of the shares of a bank holding company for purposes of appraisal rights following a merger.
DE Chancery Favors Supply-Side ERP, Rejects Size Premium ‘Liquidity Adjustment’
Delaware Court of Chancery prefers supply-side equity risk premium over historical ERP in statutory appraisal action, but rejects “novel” liquidity adjustment to size premium.
Sixteen Percent Control Premium Applied
The Delaware Court of Chancery, on remand from the Delaware Supreme Court, valued real estate partnership interests, received in a transaction, which breached the entire fairness standard contained in the partnership agreement.
Small-Stock and Company-Specific Risk Premia Considered in Fair Value Analysis
The Delaware Court of Chancery determined that a company-specific risk premium should not be added when computing the cost of capital when there is no financial analysis supporting the company-specific risk. Furthermore, the court held that a small stock ...
Management Projections and Cost of Capital Considered
The Delaware Court of Chancery considered the use of management projections and the use of WACC and CAPM in computing the cost of capital.