• Business valuations for estate planning.
• Valuations for Employee Stock Ownership Plans (ESOPs).
• Valuations for shareholder buyouts.
• Valuations for shareholder dissenter’s rights.
• Valuations for matrimonial matters.
• Valuations for financial reporting.
• Purchase price allocations for mergers.
• Goodwill impairment studies.
• Fairness opinions.
• Stock option valuations.
• IRS Sec. 409A valuations.
• Valuations for bankruptcy matters.
• Economic damages analysis.
• Merger & acquisition advisory services.

You can rely on our experience, developed through over 3,000 valuation assignments. If you have a question, please contact us. We look forward to the opportunity to be of service.

OUR RECENT E-LETTERS

FLP DISCOUNTS SAVE MURPHY FAMILY $41 MILLION

The Murphy family, during the 1990s, established a family limited partnership (FLP) to hold a sizeable portion of the family's holdings of stock and real estate. Mr. Murphy died in 2002. His estate paid over $46 million in taxes, but the IRS claimed $34 million in deficiencies. The parties ended up in District Court in Arkansas (Murphy v. U.S., 2009 WL 3366099 (W.D. Ark.)(Oct. 2, 2009). The estate went home from court with a refund of $41 million........ [More]

DCF VALUATION TRUMPS MARKET PRICE IN AMERICAN HOME MORTGAGE CASE

The unprecedented turmoil in the capital markets over the past two years has required courts to sometimes think in new ways when valuing securities. This was demonstrated in the American Home Mortgage Holdings, Inc. Chapter 11 Bankruptcy case, (2009 WL 2855888 Bkrtcy. D. Del., Sept. 8, 2009). In determining the value of a portfolio of mortgage loans in this case, the Judge, (Christopher Sontchi), opted for a discounted cash flow approach over the use of market or sale value........ [More]

SILICON VALLEY VENTURE FINANCINGS - UP ROUNDS RALLYING

A survey of second quarter 2009 Silicon Valley venture capital financings reveals that while the proportion of down round financings still exceeds up rounds (by 46% to 32%), the proportion of up rounds has inched up to 32% from 25% in the first quarter. In both the first and second quarters of 2009, down rounds accounted for 46% of financings. The corresponding down round figures for the first and second quarters of 2008 were 19% and 13%, respectively........ [More]

TAX COURT SPLITS ON FLP DISCOUNTS

The Tax Court determined that FLP valuation discounts would be permitted for initial contributions, but would be denied for deathbed additions, in the case of Miller v. Commissioner; T. C. Memo. 209-119; No. 5207-07 (May 27, 2009)........ [More]

SILICON VALLEY VENTURE FINANCING - DOWN ROUNDS PREDOMINATE

A survey of first quarter 2009 Silicon Valley venture capital financings reveals that the proportion of down round financings exceeded up rounds by 46% to 25%, with 29% flat. This was the first time since the fourth quarter of 2003 that down rounds exceeded up rounds. In the fourth quarter of 2008, down rounds accounted for 33% of financings. The corresponding figure for the first quarter of 2008 was 19%........ [More]

LIFE SCIENCE VENTURE FINANCING - DOWN ROUNDS ARE UP

A survey of 2008 San Francisco Bay Area life science venture capital financings reveals that 22% of such financings were down rounds, as compared to 12 % in 2007. A down round is defined as a transaction in which the price is lower than that of the previous round of financing. The survey covered 81 biopharm and medical device company financings, and was carried out by Fenwick & West LLP, a global law firm specializing in services to high technology and life science clients........ [More]

GOODWILL IMPAIRMENTS UP DRAMATICALLY

A recent study by PricewaterhouseCoopers LLP confirms what most observers would probably already suspect; that the number of goodwill impairments taken by corporations has soared in recent months. In particular, in the six-month period since the third quarter of 2008 through March 20, 2009, Fortune 500 companies have announced approximately $230 billion of impairments. This is more than twice the total of impairments recorded by Fortune 500 companies during the three years leading up to the third quarter of 2008........ [More]

GOODWILL ACCOUNTS FOR 47% OF AVERAGE M & A ALLOCATION

In a recent world-wide survey of purchase price allocations in business combinations, Ernst & Young found that the average acquirer allocated 47% of the enterprise value of the transaction (acquisition price plus net financial debt) to goodwill. Of the balance, 30% was allocated to tangible assets, and the rest, 23%, to identified intangible assets........ [More]

MIDDLE MARKET DEAL VALUATIONS HELD STEADY IN Q4 2008

Contrary to expectations, middle market deal volume and valuations held steady from the third quarter to the fourth quarter of 2008. What changed were debt levels, which declined dramatically. This, according to GF Data Resources, a proprietary database that collects detailed data on middle market private equity transactions (valued between $10 million and $250 million)........ [More]

DAUBERT CHALLENGES OF FINANCIAL EXPERTS UP SHARPLY

In 1999, the US Supreme Court, in its Kumho Tire ruling, extended to non-scientific expert testimony the Daubert admissibility criteria. These criteria were designed to keep "junk science" out of the courtroom. Since then, the annual number of Daubert challenges to financial experts has increased by more than 100%. This, according to a recent study by PriceWaterhouseCoopers, available here........ [More]

BUILT-IN GAINS TAX MEASURED FULLY IN LITCHFIELD CASE

In Estate of Marjorie deGreeff Litchfield v. Commissioner; T. C. Memo. 2009-21; No. 15882-05 (Jan. 29, 2009), the Tax Court (Swift) upheld valuation discounts employed by the estate to reflect potential capital gains tax liabilities built into the portfolios of two family investment holding companies........ [More]

HOUSE PROPOSAL COULD SPELL THE END OF MINORITY VALUATION DISCOUNTS

Congressman Earl Pomeroy has introduced a bill (H. R. 436; “Certain Estate Tax Relief Act of 2000“) which, among other things, seeks to impose new valuation rules for transfers of certain kinds of assets. The main thrust of the bill, which was introduced January 9, 2009, is to fix the federal estate tax exemption at $3,500,000, and set the tax rate for estates exceeding that amount at 45%. The bill also seeks to repeal the new carryover basis rules........ [More]

ESTATE PLANNING ROADMAP: ESTATE OF HURFORD

Like a map showing where the land mines are buried, the recently decided Tax Court case, Estate of Hurford (T.C. Memo. 2008-278, Dec. 11, 2008) is a tutorial on what not to do when fashioning an estate plan around family limited partnerships........ [More]

§ 409A OPTION VALUATION STANDARDS CHANGE JANUARY 1, 2009

On April 10, 2007, the IRS issued final regulations on the treatment of nonqualified deferred compensation plans under Section 409A of the Internal Revenue Code. Section 409A provides that an option granted with an exercise price that is less than the fair market value (FMV) of the underlying stock as of the date of the grant is a deferred compensation arrangement. The recipient of such an option is subject to the following adverse tax consequences: (a) taxation at the time of vesting, and (b) a 20% tax penalty in addition to income taxes. The 409A regulations have phased in over time a series of increasingly stringent tests that a company must meet in order to demonstrate that an option meets the FMV exercise test. The final and most stringent of these tests comes into effect on January 1, 2009. The key elements of the test are summarized below........ [More]