BVR Logo September 18, 2019 | Issue #204-2

BVWire is your go-to source for the latest in the business valuation profession. Highlights for this week include:

Deal price prevails in yet another Delaware statutory appraisal ruling

Nine days after his ruling in Columbia Pipeline, Vice Chancellor Laster again found the deal price was the most reliable indicator of fair value in a statutory appraisal case involving a publicly traded mining company. The Court of Chancery’s analysis in Columbia Pipeline served as a template for this case, but the court burrowed even deeper into legal issues related to the sale process and discussed in detail the party experts’ testimony on the validity of the trading price. Here, as in Columbia Pipeline, the court declined to engage with the experts’ discounted cash flow analyses.

Metal price and company value related: The litigation arose out of the sale of Stillwater Mining Co. (Stillwater) to the respondent, Sibanye Gold Ltd. (Sibanye). Stillwater primarily produced palladium and platinum, and its valuation was closely linked to the prices of these metals. The driving force behind the sale to Sibanye was Stillwater’s CEO. The contested merger closed in May 2017.

The court explained that the reliability of the deal price hinged on the integrity of the sale process. The court allowed that the presigning sale process was imperfect. The petitioners showed that the CEO had personal reasons for pursuing this sale and was singularly focused on a deal with Sibanye; he entered negotiations with Sibanye without timely informing the board, developed a pricing metric without the board’s knowledge, and organized a multiday site visit by Sibanye without cuing the board. Once in the loop, the board failed to perform meaningful oversight. But the court also found that there was a post-signing market check, which, even if rushed and conducted against the backdrop of numerous deal protections, was effective. No bidder emerged.

In assessing the specific facts, the court explored a broader issue: whether the deal price can be a reliable indicator of fair value where the seller pursues a single-bidder strategy in the presigning stage but allows for a post-signing market check. The court acknowledged that the state Supreme Court had not examined this question in the appraisal context. But the court found guidance in the Supreme Court’s enhanced scrutiny jurisprudence that applies in breach of fiduciary duty cases. The court noted that commentators on Delaware case law have noted the deal price will provide evidence of fair value in an appraisal proceeding that features a publicly traded company if the sale process would satisfy the enhanced scrutiny standard in a fiduciary challenge. In addition, the court considered the facts underlying the Delaware Supreme Court decisions in DFC Global, Dell, and Aruba. Recognizing that not all cases “are squarely on point,” the Court of Chancery proposed that a single-bidder process may produce a reliable deal price if the merger agreement allowed for a passive post-signing market check and no other factors undermined the sale process.

This was the case here, the court concluded, endorsing the deal price. No one argued in favor of an adjustment for synergies, but the court suggested that the petitioner could have, but did not, argue for an upward adjustment to the deal price due to an increase in the company’s value between the date of announcing and closing the merger because of an increase in the value of the metals Stillwater produced. The petitioners’ expert did make a related argument in favor of adjusting the trading price upward, but this argument went nowhere, since the court found the trading price was a less reliable indicator of fair value than the deal price.

The deal price, and the company’s fair value on the closing of the merger, was $18 per share, the court found.

A digest of In re Stillwater Mining Co., 2019 Del. Ch. LEXIS 3020 (Aug. 21, 2019), and the court’s opinion will be available soon at BVLaw. Digests of the various DFC Global, Dell, and Aruba Networks decisions as well as the courts’ opinions are available at BVLaw.

The pen is mighty as a career builder in BV

In a recent interview, Nancy Fannon (Marcum LLP) advises that one of the ways to stand out in the business valuation profession is to write, whether it be articles or books. This is one of the ways to build authority, which is a valuation expert’s competitive advantage, points out Rod Burkert (Burkert Valuation Advisors LLC), who conducted the interview. Fannon, who has written several books, chose her subjects based on those areas where there was both opportunity and also a need for information and guidance. Her books include the use of transaction databases, S corp tax affecting, and damages. A question from the audience asked about self-publishing (which is easy today) versus working with an established publisher. Fannon says she “can’t imagine self-publishing” because there are a lot of other things to tackle in addition to the writing that a publisher will handle, such as help with research, editing, indexing, and marketing. Fannon’s latest book is The Comprehensive Guide to Economic Damages, 5th edition, co-written with Jonathan Dunitz, Esq. (Verrill Dana), published by BVR. The interview is part of a new webinar series Burkert hosts titled Practice Development INSIDER that features some of the leading valuation practitioners revealing their time-tested ideas behind building a practice. For more information on the series, go to Burkert’s website.

IRS updates QBI deduction FAQs

Under the Tax Cuts and Jobs Act, Section 199A allows taxpayers to deduct up to 20% of qualified business income for tax years 2018 through 2025. The qualified business income (QBI) deduction is available for many owners of sole proprietorships, partnerships, and S corporations, as well as some trusts and estates. The IRS has updated its list of frequently asked questions (FAQs) on the QBI deduction. One addition of note is Question 33 on the treatment of the self-employed health insurance deduction for an S corporation shareholder. The IRS says: “Generally, the self-employed health insurance deduction under section 162(l) is considered attributable to a trade or business for purposes of section 199A and will be a deduction in determining QBI. This may result in QBI being reduced at both the entity and the shareholder level.” For the full set of FAQs, click here. The QBI deduction affects businesses’ cash flow, operations, and long-term strategy, which impact valuations of a range of businesses. While the TCJA provided permanent tax relief to corporations, which saw their tax rate slashed from 35% to 21% and an end to U.S. taxes on much of their foreign profits, PTE owners got only temporary relief under the law’s individual tax provisions, which are due to expire after 2025.

TAF looking for experts on company-specific risk

The Appraisal Foundation (TAF) is seeking subject matter experts (SMEs) to help develop voluntary guidance on company-specific risk premiums, which it has identified as an area that lacks uniformity in practice. The primary issue that will be explored is whether the valuation specialist should adjust the discount rate, the prospective financial information (PFI), or both. The SMEs will work with an assigned liaison from the organization’s Business Valuation Resource Panel. Completed applications must be submitted by October 1. For an application, click here. If you have any questions, please contact Jalin Debeuneure, special projects coordinator, via e-mail at or by calling 202-624-3055.

In court, you must appeal to the jury

Do you think you can win over a jury with just your credentials and technical knowledge? More important is whether you are “likable,” says veteran appraiser and expert witness Henry J. Wise in his new book,It’s Only an Opinion: An Appraiser in Court. Sure, the members of the jury will listen to your qualifications and your testimony—for just a few minutes—and then they will get bored. “The jury isn’t really going to listen to and weigh all your cogent arguments,” he writes. “What the jury is really going to decide is whether they like you better than they like the expert on the other side. If they like you, they are more likely to trust you. If they trust you, they will be much more likely to accept your opinion.” Wise dealt mostly in real estate appraisals, but his book is of interest to appraisers in any discipline.

Reminder: Comments due on financial instruments standards

Until now, there has been no effective set of international valuation practice standards for financial instruments that has been generally adopted, according to the International Valuation Standards Council (IVSC). The organization’s recently appointed Financial Instruments Standards Board has published an Agenda Consultation, seeking feedback regarding the approach the board should take and how it should prioritize its work. Comments are due September 26. All comments will be published on the IVSC website.

ASA enhances global collaborations

There was a more-than-usual presence of international attendees at the ASA Joint 2019 Advanced Business Valuation and International Appraisers Conference in New York City sponsored by the American Society of Appraisers. This reflects the increased collaboration between the ASA and global valuation organizations, such as RICS (a London-based valuation professional organization) and the CBV Institute (formerly the CICBV, a Canadian group). For instance, the ASA and RICS have signed a Letter of Intent to work together to “ease fragmentation” in the profession. Also, the ASA recently entered into a Memorandum of Understanding (MOU) with ANEVAR, the national association of authorized valuers in Romania, that focuses on standards, education, and designation reciprocity. At the conference, we noticed attendees from such places as Switzerland, Saudi Arabia, Brazil, Sweden, Israel, Russia, Mexico, Japan, Korea, Slovenia, and Kazakhstan, just to name a few.

Preview of the October 2019 issue of Business Valuation Update

Here’s what you’ll see:

  • Gems From the ASA Advanced BV Conference in New York City” (BVR Editor). Notable sessions at the American Society of Appraisers 2019 Advanced BV Conference included a panel that included a state supreme court judge who answered questions very candidly, tips from IRS representatives, several sessions on the size effect, and more.
  • Acquisition Premiums Amid Added Complexity in Market Transactions” (Evan Miller, Whitley Penn). In a fair value setting, while the acquisition premium (known also as a control premium) has been identified as a significant variable, its application and value measurement remain less well understood than the traditional components of acquisition finance.
  • Rules of Thumb Highlight the 2019 Business Reference Guide” (BVR Editor). By far the most valuable information in the newest edition of this book is the coverage of pricing rules of thumb. This article discusses caveats when using rules of thumb and also reviews their use in litigation with reference to relevant court cases.
  • Factoring Workforce Engagement Into a Business Valuation” (BVR Editor). Someday, a “workforce engagement adjustment” will be made to the calculation of the value of an assembled workforce, say a panel of speakers on a BVR webinar. In the meantime, all valuation experts should be taking this factor into account for any business valuation when assessing specific company risk.

The issue also includes:

  • An expanded section of “BV News and Trends/Global BV News and Trends.”
  • Regular features: “Ask the Experts” and “Tip of the Month.”
  • BV data spotlight: “DealStats MVIC/Revenue Trends,” “ktMINE Royalty Rate Data,” “Economic Outlook for the Month,” and “FactSet Mergerstat/BVR Control Premium Study.”
  • BVLaw Case Update: The latest court cases that involve business valuation issues.

To stay current on business valuation, check out the October issue of Business Valuation Update.

BV movers ...

People: Dave Gaynor has been promoted to managing director in advisory services of Crowe LLP, a public accounting, consulting, and technology firm; he is based in the firm’s New York City office and is the group leader for healthcare valuation services … Rosanne Aumiller, CPA/ABV, ASA, has joined Citizens Capital Markets as director—valuation advisory; she provides valuations for financial reporting, business succession, ESOP, and tax purposes … Chris Brinich, senior associate in the valuation and transaction advisory service team at New Philadelphia, Ohio-based Rea & Associates, passed the Level III Chartered Financial Analyst exam; he is in the firm’s Dublin, Ohio, office.

Firms: Sacramento-based MGO LLP expands its presence in New York City with the acquisition of Schwartz & Co. LLP; the acquisition increases the firm’s professional team to 450 … Wojeski & Co. CPAs (Albany, N.Y.) has acquired DeChants, Fuglein & Johnson LLP after forming a strategic alliance earlier this year; the combined firm has a total staff count of 40 … Moore Stephens North America has become Moore North America, part of a wider rebrand of the Moore Stephens global accountancy and consultancy network; the rebrand includes a new logo, visual identity, and brand positioning … Tulsa, Okla.-based HoganTaylor joined the North America region of international association PrimeGlobal, an international association of independent accounting firms … San Diego-based Lohman & Dehner will open an office in Nashville, Tenn.

Please send your professional and firm news to us at

Upcoming BVR training events

  • Goodwill: A Discussion and a Debate (September 18), with R. James Alerding (Alerding Consulting LLC) and Alan Zipp.

    Hear two of the most knowledgeable experts in the area of goodwill and personal goodwill cover the key issues and controversies that every valuation expert needs to know about.

  • A Script for Pharmacy Valuation (September 24), with Kathryn Culver (PYA) and Annapoorani Bhat (PYA). Part of BVR’s Special Series presented by the BVR/AHLA Guide to Healthcare Industry Finance and Valuation.

    A look at the pharmacy sector of healthcare: value drivers, industry players, current and emerging pharmacy trends, operational considerations, and valuation methods.

We welcome your feedback and comments. Contact Andy Dzamba (Executive Editor) or Sylvia Golden, Esq. (Executive Legal Editor) at:

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