Several years ago, I wrote about the most recent appellate level case in Kentucky (Shawnee Telecom Resources, Inc. v. Kathy Brown) addressing the question of statutory fair value in Kentucky. Given several recent conversations with Kentucky clients, a revisit of that case seems appropriate.

In the 8th post in my Statutory Fair Value and Business Valuation Series, we focus on the case Verghetta v. Lawlor. We consider five valuation issues this case raises: reasonableness of valuation conclusions, reasonableness of normalization adjustments, reasonableness of projections, whether the earnings of tax pass-through entities should be tax-effected, and appropriateness of a marketability discount.

The discounted cash flow model as summarized by the Gordon Model provides an ideal basis for discussing what we call an integrated theory of business valuation. In this post, we begin with a bit of introduction for perspective.

Peter Mahler reported this week on a recent New Jersey appellate level case focusing on the application of a 25% marketability discount in a statutory fair value determination in his New York Business Divorce blog. The New Jersey Appellate Division issued an unpublished decision in Wisniewski v Walsh, 2015 N.J. Super. Unpub. LEXIS 3001 [App. Div. Dec. 24, 2015]. The case is interesting in that it attempts to determine a marketability discount in relationship to the “bad behavior” of a selling shareholder. Given the timeliness of the case, I’ll interrupt the background posts on statutory fair value for a week and look at this New Jersey case.

In the last post, we introduced the “traditional” levels of value chart with three distinct levels. In this post, we compare and contrast the traditional chart with a revised four-level (really three with the overlapping of marketable minority and financial control) chart.

In the initial post in this series on statutory fair value, we introduced the ideas that fair value is, in part, an equitable concept, and that appraisers are not in a position to make “equitable” decisions.

Appraisers cannot decide matters of equity, but we can provide good and clear valuation evidence to courts in statutory fair value matters. In this post, we will address what appraisers call “levels of value.” Courts are generally familiar with some of the concepts, but I do not believe that most courts are familiar with the growing understanding of the levels of value concept in the appraisal profession. This lack of understanding creates confusion and increases the difficulty of presenting valuation evidence in statutory fair value proceedings.

This is the first in a series of posts on the topic of Statutory Fair Value and Business Valuation. In this post, we examine the concept of statutory fair value, especially as it is defined in the state of Delaware as well as the difference between the concepts of “fair value” and “fair market value.”