Caught in the valuation crossfire, judges fire back by appointing their own experts
It’s not unusual for a federal court to appoint a technical expert as an independent advisor pursuant to Rule 706 of the Federal Rules of Evidence. But now, in two high-pressure and high-profile legal settings, judges have taken the unusual step of appointing a 706 expert to testify specifically on valuation—in one case, to calculate [...]
Do fewer bankruptcy filings mean less work for valuators?
Despite an 8% increase in new U.S. bankruptcy filings from 2009 to 2010, the pace has slowed from the 30% annual increases since 2006, according to the latest report from the Administrative Office of U.S. Courts. Although this may be good news for the general economy, BVWire asked attorney Daniel Perry (Milbank) what it may [...]
Expert’s ‘hyberbole’ comes back to haunt in Daubert hearing
Experienced litigation experts know that their published articles and statements (even on a blog or in a professional discussion group) can be used against them in a courtroom. That’s what happened in a recent bankruptcy case, when the expert conducted an insolvency analysis without interviewing management or visiting the subject properties, yet claimed in a [...]
The call to be the third appraiser can be problematic
Chris Mercer (Mercer Capital) posted this insight on his Valuation Speak blog this week: “Over the last several years, I’ve been involved in several multiple appraiser valuation processes as the third appraiser. These experiences provide the basis for a few ideas to ‘fix’ a process that is already underway and headed for almost certain trouble [...]
Key person discount central issue in NY trial court
Hat tip to Peter Mahler (Farrell Fritz PC) for an in-depth review of a recent NY trial court opinion in which a key person discount was a focal point. In his blog post “Key Person Discount Takes Center Stage in Stock Valuation Proceeding” Mahler writes: “When the controlling shareholders terminate the employment of a minority shareholder who then [...]
More support for using more than just DCF (or other single method) in valuations
In re Chemtura Corp., 2010 WL 4272727 (Bkrtcy. S.D. NY.)(Oct. 29, 2010) The Chemtura Corporation, a specialty chemical maker and its affiliates, filed for bankruptcy in March 2009—becoming the third major U.S. chemical manufacturer to succumb to the recession. A year later, the debtors proposed a plan of reorganization and settlement of claims. No creditors [...]
Confronting a valuation “fresh start” valuation assignment? Here’s some ASC 852 guidance from PCE
Brett Cooper (PCE Valuations) reports “Accounting Standards Codification (ASC) 852 addresses the financial reporting requirements required by U.S. GAAP for fresh start reporting. It requires that the value of the emerging entity be determined using the Fair Value standard and specifically discusses use of the discounted cash flow (DCF) method of valuation.” Cooper adds: “When [...]
Solvency opinions are suddenly much in the news…
From Bloomberg to Editor & Publisher just about every news source in the country has reported on Sam Zell’s buyout of the Tribune, the resulting bankruptcy, and VRC’s flawed solvency opinion. It is interesting to see what examiner Kenneth Klee’s extensive investigation will do for the business valuation profession. What do you think? Send your [...]
Mercer Capital on the accounting considerations in the acquisition of a failed bank
“Assisted transactions whereby the acquirer obtains the failed bank’s assets, including its loans, along with a loss-sharing agreement present a much more complicated series of valuation and accounting issues,” according to a recent Mercer Capital article, “Accounting Considerations in the Acquisition of a Failed Bank.” When purchasing a failed bank, acquirers must answer several challenging [...]
Court rejects use of historic three-year average under Daubert
Have you ever used a business’s three-year historical annual average to project sales and revenue growth, EBITDA or capital expenditures? Have you ever used the term “zone of insolvency” to describe a business on the brink of bankruptcy? Does your valuation report sometimes omit the precise formula used in your DCF? If you answered “yes” [...]
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