Category Archives: Valuations

Improper Use of Active/Passive Framework Skewers Valuation

February 25, 2019 | Court Rulings, Valuations

Bair v. Bair  When confronted with quantifying the appreciation of non-marital property, it is common for valuators first to classify the change in value as “active” or “passive” and then do the valuation. A Florida case shows that, when applied prematurely, this active/passive analysis may result in an improper valuation.   The parties fought over the valuation  Continue Reading »

Eleventh Circuit Affirms Tax Court’s Valuation of Trust’s Interest in LLC

February 11, 2019 | Court Rulings, Valuations

Estate of Koons v. Commissioner (Koons II)  The 11th Circuit Court of Appeals upheld a 2013 Tax Court ruling in an estate and generation-skipping tax case that centered on the fair market value of a revocable trust’s interest in an LLC. The crux of the valuation was the marketability discount. Valuators can benefit from the  Continue Reading »

CUT Method Prevails in Amazon’s Transfer Pricing War with IRS

January 14, 2019 | Court Rulings, Valuations

Amazon.com, Inc. v. Commissioner Amazon scored a win against the Internal Revenue Service in a transfer pricing case. The dispute was over the calculation of buy-in payments to compensate Amazon US for the transfer of a group of intangibles to the company’s European subsidiary and the cost-sharing payments related to ongoing development of intangibles. The  Continue Reading »

Court in Brundle Case Sticks to Earlier ESOP Liability and Damages Rulings

January 2, 2019 | Court Rulings, Valuations

Brundle v. Wilmington Trust N.A. (Brundle II) Three months after ruling the ESOP trustee was liable for causing the plan to overpay, the court had a chance to revisit its decision in the context of the trustee’s motion for reconsideration. While the court admitted to some valuation-related errors, it concluded those were nonconsequential. The most  Continue Reading »

Compromised Projections Compel Chancery to ‘Defer’ to Deal Price

December 17, 2018 | Court Rulings, Valuations

In re PetSmart, Inc. A statutory appraisal decision from the Delaware Court of Chancery offered a familiar valuation contest between the discounted cash flow analysis and the merger price. Shareholders opposed to the going-private merger of PetSmart claimed that their discounted cash flow analysis was the best indicator of fair value. The company advocated in  Continue Reading »

Chancery’s DCF Upends Appraisal Arbitrage Strategy

December 3, 2018 | Court Rulings, Valuations

In re Appraisal of SWS Group, Inc. Only days after deferring to the merger price in the PetSmart case, the Delaware Court of Chancery opted for the discounted cash flow analysis in the instant appraisal proceeding. This case, which featured a bank holding company, presented a challenge of how to account for the target’s excess  Continue Reading »

Appreciation Case Highlights Contribution by Non-Owner Spouse

November 19, 2018 | Court Rulings, Divorce Litigation, Valuations

Allison v. Allison A Michigan divorce case that centered on the non-owner spouse’s right to the appreciation in value of allegedly separate property is informative as it shows what factors the court considers for its active/passive analysis. However, the size of the award to the non-owner spouse also suggests that the court, in the end,  Continue Reading »

Expert’s Damages Opinion Specific Enough for Class Certification Stage

November 5, 2018 | Court Rulings, Valuations

Willis v. Big Lots, Inc. In what is becoming a common practice, the defendants in a potential securities class action filed a Daubert challenge to exclude financial expert testimony at the class certification stage. Although courts are divided whether Daubert should apply at this early stage in the litigation, the court here considered the motion.  Continue Reading »

Tax Court’s Valuation of Trust’s Interest in LLC Weathers Appeal

October 22, 2018 | Court Rulings, Valuations

Estate of Koons v. Commissioner (Koons II), The 11th Circuit Court of Appeals upheld a 2013 Tax Court ruling involving a revocable trust’s interest in a limited partnership. The valuation turned on the marketability discount. The 11th Circuit opinion shows the Tax Court’s decision regarding expert testimony was less focused on valuation methodology than on  Continue Reading »

Proxy Gave ‘Fair’ Summary of Valuation Work, Chancery Says

October 10, 2018 | Court Rulings, Valuations

In re Merge Healthcare Inc., Stockholders Litig. Several decisions in the Delaware Court of Chancery have focused on the use of the business judgment rule to defeat breach of fiduciary duty claims. Under the rule, the court does not second-guess a deal where a majority of disinterested, informed shareholders approved the transaction. In the most  Continue Reading »