This quarter’s “Valuation Tales” includes three licensed excerpts provided by Business Valuation Resources (BVR).
- The key issue addressed in the article Security Interest Exists in Economic Value of FCC License parallels an important financing issue for the typical beverage distribution acquisition. The holder of an FCC license cannot offer the license as security but the holder can offer the proceeds of the sale of the license as security. Similarly, a lender typically cannot be given an interest in the distribution rights themselves but they can take an interest in the proceeds from the sale of distribution rights.
- The second excerpt deals with courts appointing their own experts. I find it a somewhat troubling situation for the valuation profession if courts feel compelled to appoint a valuation expert for the sake independence and as a means of avoiding so called “valuation wars”. The stated role and professional standards of valuation experts dictate their independence. Additionally when opposing experts quantify the valuation impact of factual or legal matters under dispute they serve an important function.
- The last excerpt, FASB helps out with ‘market participant’ definitions, notes that fair value guidance could have some relevance for the valuation of private companies. Some of the distinguishing characteristics suggested by the SEC touch on key beverage distributor valuation issues like “financial versus strategic buyers”, “financial capacity”, “acquisition strategy”, and “marketplace synergies”.
Continue reading Valuation Tales: 2011 – Q4
This quarter’s “Valuation Tales” includes four licensed excerpts provided by Business Valuation Resources (BVR).
- In S. Muoio & Co., LLC v. Hallmark Entertainment Investments, the Delaware Chancery Court stresses the use of multiple methods. The case supports the principle that multiple methods should be used, including cost, income (e.g., DCF), and market (i.e., multiples).
- A review of several cases involving Lost Profits Damages and Lessons Learned from Daubert, including discussion of comparable cohorts, yardsticks, and other valuation techniques. These cases illustrate how contracts, statutes, and other factors can dictate damages.
- Hendrix v. Commissioner details a tax court’s decision to uphold a defined value clause. This is the type of case that might provide food for thought if you are working on a buy-sell agreement or shareholders’ agreement.
- The Estate of Cohen v. Booth Computers asks the question, “Is a Buy-Sell at Book Value Unconscionable, When FMV is 60 Times Greater?” This case offers an out-of-proportion lesson on how not to integrate accounting, valuation, and a buyout provision.
Continue reading Valuation Tales: 2011 – Q3
The Valuation Tales portion of DMGF’s newsletter contains content licensed from Business Valuation Resources (BVR). Each quarter BVR sends DMG Financial (DMGF) a broad selection of valuation-related excerpts. We wade through them all to provide the best, most relevant excerpts about the many issues our clients face today. Also included is a discussion of why DMG Financial selected the particular excerpts. It is important to remember, however, that court proceedings discussed in the newsletter can turn on individual facts and circumstances—which might or might not be conveyed in the condensed excerpts.
DMGF’s Valuation Tales Selections for Second Quarter, 2011:
Daubert and the Lost Profits Expert: Recent Cases was selected because studies show Daubert challenges are on the rise. Dear little Daubert isn’t a newborn ruling anymore. Daubert has reached the age of majority and the Daubert challenge has started to develop a healthy set of precedents. Yet, as the three cases included in this excerpt show, it still is not abundantly clear what sort of facts result in expert testimony being precluded.
Continue reading Valuation Tales: 2011 – Q2
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