Abstract

The Delaware Court of Chancery decided an unusually high number of appraisal cases during 2004 and 2005. In an appraisal, the Court looks at a company as it exists at the date of the transaction—the “operative reality.” Actions planned by a third-party acquiror before a change of control are normally excluded in a Delaware appraisal, but should be taken into account in second-stage mergers. The Court used discounted cash flow as its primary valuation methodology. This may reflect the fact that cases involving profitable companies with good comparable companies are easier to settle. In applying the comparable company method, the Chancery Court has been applying control premiums, even in a case in which no testimony supported a control premium. The appraisal valuations in 2004–5 did not display a tendency in favor of either petitioner or respondent.

Abstract

The transaction databases are a rich source of valuable information that can be used to strongly support your valuation. However, for the uninitiated and unwary, misuse of the information provided by the data-bases may seriously undermine your opinion of value. This article tells you how to get reliable results from proper use of the data.

Although we have made every effort to present the most accurate information, we make no representations or warranties with respect to its applications to a particular valuation assignment. Each appraiser should analyze his or her own situation carefully when determining the appropriate use of market data.

Abstract

If a business appraiser ignores the value of employee stock options when calculating the market value of invested capital (MVIC) for guideline publicly traded companies, the appraiser may significantly undervalue his or her subject company, all else being equal.