Fox v. CDx Holdings, 2015 Del. Ch. LEXIS 194 (July 28, 2015) The Delaware Court of Chancery has on numerous occasions called out major financial institutions for providing erroneous or even “motivated” valuations. But few opinions include more searing criticism than a decision from Vice Chancellor Laster, in which he said a major accounting firm’s  Continue Reading »

Valuation experts often criticize the Excess Earnings Method, calling it ambiguous, over-simplified or outdated. But it’s still used in some jurisdictions as a way to value small businesses and professional practices, especially in a divorce setting. The method was originally created to compensate wineries and distilleries during Prohibition. The Excess Earnings Method is the subject of IRS Revenue Ruling  Continue Reading »

Kardash v. Commissioner, 2015 Tax Ct. Memo LEXIS 69 (March 18, 2015) A Tax Court memo resulting from a transferee liability case includes an informative discussion of the valuation methodologies the parties’ solvency experts used to determine the company’s fair market value at the point when various contested transfers of payment took place. The court’s  Continue Reading »

Schickner v. Schickner, 2015 Ariz. App. LEXIS 48 (April 16, 2015) In the context of divorce, may a court apply a minority discount when valuing a minority interest in a business to determine the nonowner spouse’s fair share? This was the primary issue the Arizona appeals court addressed in ruling on the wife’s claim that  Continue Reading »

In re Honer, 2015 Cal. App. Unpub. LEXIS 2531 (April 9, 2015) In a bitter California divorce, the valuation of two grocery stores was a sore point. The wife attacked the work of the husband’s expert because he used what he called the “marital value.” The appeals court seemed surprised by the term and discussed  Continue Reading »

There is a common perception that financial expert witnesses are biased in favor of their clients’ financial interests. In truth, credentialed professionals must adhere to various ethical standards that require them to be independent and objective when serving as an expert witness in a litigation matter. However, there are times when experts aren’t provided with  Continue Reading »

Which would you (or one of your clients) rather receive in a divorce settlement: cash or stock in a closely held business that is controlled by your former spouse? When divorce gets ugly, and it often does, cash might be a safer bet than in-kind distributions, but the answer depends on the amount of cash, the  Continue Reading »

Chancery Adopts Merger Price Sans Cost Savings Reduction Merlin Partners LP v. AutoInfo, Inc., 2015 Del. Ch. LEXIS 128 (April 30, 2015) In a Delaware statutory appraisal action, the Chancery once again determined that the merger price trumped values resulting from other valuation analyses. But before “placing full weight on the Merger price,” Vice Chancellor  Continue Reading »

Business valuations are prepared as of a specific date, similar to balance sheets. Sometimes a valuation’s effective date is in the past, and events have occurred after the valuation date that would have impacted the company’s value if investors knew (or could have known) about them beforehand. These retrospective valuations are common in litigation and  Continue Reading »

Cartwright v. Jackson Capital Partners, Limited Partnership, 2015 Tenn. App. LEXIS 361 (May 21, 2015) Did the appraiser use the wrong method for the case? This question took center stage in a lawsuit featuring the beneficiary of a grantor trust who claimed the trustee had deprived him of all the distributions to which he was  Continue Reading »