Law Commons^™

Stock Market Value And Deal Value In Appraisal Proceedings, Robert T. Miller

Notre Dame Law Review

This Essay considers two methods of valuing public companies in the context of appraisal proceedings under section 262 of the Delaware General Corporation Law (DGCL). The first method relies on the efficient capital markets hypothesis (ECMH) and values the company based on the market price of its shares before any public disclosure of the possibility of a transaction (the unaffected market price). The second relies on the price that an unrelated party agrees to pay to acquire the company in a transaction negotiated at arm’s length after a robust sales process by the selling board (the deal price). Both the …

A Babe In The Woods: An Essay On Kirby Lumber And The Evolution Of Corporate Law, Lawrence Hamermesh

All Faculty Scholarship

This essay examines the development of corporate law during the time span of the author's career, focusing on the interrelated subjects of valuation, corporate purpose, and shareholder litigation.

Jpmorgan Chase London Whale B: Derivatives Valuation, Arwin G. Zeissler, Andrew Metrick

Journal of Financial Crises

After consistently producing positive results through 2011, the JPMorgan Chase (JPM) traders who oversaw the bank’s Synthetic Credit Portfolio (SCP) grew alarmed by a consistent string of losses beginning in January 2012. (The SCP was maintained by JPM to help hedge default risk and was the source of the 2012 London Whale trading loss.) To minimize the losses reported to their superiors until such time that market prices hopefully turned in their favor, the SCP traders began valuing their largest derivative positions in a manner that was not consistent with Generally Accepted Accounting Principles (GAAP) and JPM policy. The fair …

Finding The Right Balance In Appraisal Litigation: Deal Price, Deal Process, And Synergies, Lawrence A. Hamermesh, Michael L. Wachter

All Faculty Scholarship

This article examines the evolution of Delaware appraisal litigation and concludes that recent precedents have created a satisfactory framework in which the remedy is most effective in the case of transactions where there is the greatest reason to question the efficacy of the market for corporate control, and vice versa. We suggest that, in effect, the developing framework invites the courts to accept the deal price as the proper measure of fair value, not because of any presumption that would operate in the absence of proof, but where the proponent of the transaction affirmatively demonstrates that the transaction would survive …

Valuation Disputes In Corporate Bankruptcy, Kenneth M. Ayotte, Edward R. Morrison

Faculty Scholarship

Prior scholarship points to disagreements about valuation and judicial valuation error as key drivers of Chapter 11 outcomes. Avoiding valuation disputes and valuation errors is also the underlying driver of most proposed reforms, from Baird’s auctions to Bebchuk’s options. In this paper, we undertake a detailed examination of bankruptcy court opinions involving valuation disputes. Our paper has two goals. The first is to understand how parties and their expert witnesses justify their opposing views to the judge, and how judges decide between them. The second is to provide practical guidance to judges in resolving valuation disputes. We document surprisingly pervasive …

The Value Of Soft Variables In Corporate Reorganizations, Michelle M. Harner

Faculty Scholarship

When a company is worth more as a going concern than on a liquidation basis, what creates that additional value? Is it the people, management decisions, the simple synergies of the operating business, or some combination of these types of soft variables? And perhaps more importantly, who owns or has an interest in these soft variables? This article explores these questions under existing legal doctrine and practice norms. Specifically, it discusses the characterization of soft variables under applicable law and in financing documents, and it surveys related judicial decisions. It also considers the overarching public policy and Constitutional implications of …

The Value Of Soft Variables In Corporate Reorganizations, Michelle M. Harner

Michelle M. Harner

When a company is worth more as a going concern than on a liquidation basis, what creates that additional value? Is it the people, management decisions, the simple synergies of the operating business, or some combination of these types of soft variables? And perhaps more importantly, who owns or has an interest in these soft variables? This article explores these questions under existing legal doctrine and practice norms. Specifically, it discusses the characterization of soft variables under applicable law and in financing documents, and it surveys related judicial decisions. It also considers the overarching public policy and Constitutional implications of …

Value Creation By Business Lawyers: Where Are We And Where Are We Going?, Elizabeth Pollman

All Faculty Scholarship

This is a transcript of Professor Elizabeth Pollman’s remarks for the “Value Creation by Business Lawyers in the 21st Century” panel at the 2014 AALS Annual Meeting. The panel commemorated the 30th anniversary of Ronald Gilson’s article, Value Creation by Business Lawyers: Legal Skills and Asset Pricing. Professor Pollman’s remarks examined the influence of the Gilson article and potential areas for future work in light of regulatory and technological changes affecting transactional lawyering as well as the rise of in-house counsel.

Valuing The Environment: Noaa's New Regulations Under The Oil Pollution Act Of 1990, Ronald M. Pierce

Pepperdine Law Review

No abstract provided.

Minority Discounts And Control Premiums In Appraisal Proceedings, Richard A. Booth Marbury Research Professor Of Law

Richard A Booth

In a merger, a stockholder often has a statutory right of dissent and appraisal under which the stockholder may demand to be paid fair value exclusive of any gain or loss that may arise from the merger itself. Most courts and commentators agree that a dissenting stockholder should ordinarily receive a pro rata share of the fair value of the corporation without any discount simply because minority shares lack control. In several recent cases, the courts have indicated that a minority stockholder is thus entitled to a share of the control value of the corporation even though the merger does …

Bankruptcy Vérité, Lynn M. Lopucki, Joseph W. Doherty

Michigan Law Review

In the empirical study we report in Bankruptcy Fire Sales, we compared the recoveries from the going-concern bankruptcy sales of twenty-five large, public companies with the recoveries from the bankruptcy reorganizations of thirty large, public companies. We found that, controlling for the asset size of the company and its presale or pre-reorganization earnings ("EBITDA"), reorganization recoveries were more than double sale recovenes. We are honored that Professor James J. White has chosen to comment on our study. White is an eloquent defender of the status quo, pulls no punches, and always has something interesting to say. Bankruptcy Noir is …

The Short And Puzzling Life Of The “Implicit Minority Discount” In Delaware Appraisal Law, Lawrence A. Hamermesh, Michael L. Wachter

All Faculty Scholarship

The “implicit minority discount,” or IMD, is a fairly new concept in Delaware appraisal law. A review of the case law discussing the concept, however, reveals that it has emerged haphazardly and has not been fully tested against principles that are generally accepted in the financial community. While control share blocks are valued at a premium because of the particular rights and opportunities associated with control, these are elements of value that cannot fairly be viewed as belonging either to the corporation or its shareholders. In corporations with widely dispersed share holdings, the firm is subject to agency costs that …

Sarbanes-Oxley And The Cross-Listing Premium, Kate Litvak

Michigan Law Review

This article tests whether the Sarbanes-Oxley Act ("SOX") affected the premium that investors are willing to pay for shares of foreign companies cross-listed in the United States. I find that from year-end 2001 (pre-SOX) to year-end 2002 (after SOX adoption), the Tobin's q and market/book ratios of foreign companies subject to SOX (cross-listed on levels 2 or 3) declined significantly, relative to Tobin's q and market/book ratios of both (i) matching non-cross-listed foreign companies from the same country, the same industry, and of similar size, and (ii) cross-listed companies from the same country that are not subject to SOX (listed …

Patterns In A Complex System: An Empirical Study Of Valuation In Business Bankruptcy Cases, Bernard Trujillo

ExpressO

This Article applies complex systems research methods to explore the characteristics of the bankruptcy legal system, presenting the results of an empirical study of twenty years of bankruptcy court valuation doctrine in business cramdown cases. These data provide solid descriptions of how courts exercise their discretion in valuing firms and assets.

This Article accomplishes two objectives: First, using scientific methodology, this Article explains the content of bankruptcy valuation doctrine. Second, this Article uses doctrine as a variable to explore system dynamics that govern the processes of change over time.

Significant findings include (i) courts tend to “split the difference” in …

Going-Private Decisions And The Sarbanes-Oxley Act Of 2002: A Cross-Country Analysis, Ehud Kamar, Pinar Karaca-Mandic, Eric L. Talley

Faculty Scholarship

This article investigates whether the passage and the implementation of the Sarbanes-Oxley Act of 2002 (SOX) drove firms out of the public capital market. To control for other factors affecting exit decisions, we examine the post-SOX change in the propensity of public American targets to be bought by private acquirers rather than public ones with the corresponding change for foreign targets, which were outside the purview of SOX. Our findings are consistent with the hypothesis that SOX induced small firms to exit the public capital market during the year following its enactment. In contrast, SOX appears to have had little …

The Impact Of Modern Finance Theory In Acquisition Cases, Rutheford B. Campbell Jr.

Law Faculty Scholarly Articles

In February of 1983, the Supreme Court of Delaware decided Weinberger v. UOP, Inc. The case holds that, in determining the present value of a corporation involved in an acquisition, courts are free to use “any techniques or methods [of valuation] which are generally considered acceptable in the financial community…”

The rule in Delaware prior to Weinberger required courts to determine the present value of a corporation by use of the Delaware block method of valuation exclusively. The Delaware block method, however, is a poor way to determine the present value of a corporation. As a result, even before the …

Minority Discounts And Control Premiums In Appraisal Proceedings, Richard A. Booth Marbury Research Professor Of Law

Faculty Scholarship

In a merger, a stockholder often has a statutory right of dissent and appraisal under which the stockholder may demand to be paid fair value exclusive of any gain or loss that may arise from the merger itself. Most courts and commentators agree that a dissenting stockholder should ordinarily receive a pro rata share of the fair value of the corporation without any discount simply because minority shares lack control. In several recent cases, the courts have indicated that a minority stockholder is thus entitled to a share of the control value of the corporation even though the merger does …

The Sec's "Fair Value" Standard For Mutual Fund Investment In Restricted Shares And Other Illiquid Securities , Janet Kiholm Smith Dr.

Fordham Journal of Corporate & Financial Law

No abstract provided.

But Can She Keep The Car? Some Thoughts On Collateral Retention In Consumer Chapter 7 Cases, Marianne B. Culhane, Michaela M. White

Fordham Journal of Corporate & Financial Law

No abstract provided.

The Overlooked Corporate Finance Problems Of A Microsoft Breakup, David I. Walker

Faculty Scholarship

The paper identifies problems with the ordered breakup of Microsoft that seem to have been completely overlooked by the government, the judge, and the commentators. The breakup order prohibits Bill Gates and other large Microsoft shareholders from owning shares in both of the companies that would result from the separation. Given this prohibition, we show, dividing the securities in the resultant companies among the shareholders is not as straightforward as the government has suggested. Any method of distributing the securities that would comply with this mandate would either (i) impose a significant financial penalty on Microsoft's large shareholders that is …

Valuations In The Business Setting, Harold G. Martin Jr.

William & Mary Annual Tax Conference

No abstract provided.

Valuations In The Business Setting: International Glossary Of Business Valuation Terms

William & Mary Annual Tax Conference

No abstract provided.

Valuations In The Business Setting: Exhibits

William & Mary Annual Tax Conference

No abstract provided.

Fair Value And Fair Price In Corporate Acquisitions, Rutheford B. Campbell Jr.

Law Faculty Scholarly Articles

In statutory corporate acquisitions, dissenters' rights entitle shareholders of acquired corporations to obtain a "fair value" for their consideration, while common-law fiduciary duties ensure that such shareholders receive a "fair price" in the transaction. Courts, however, have had difficulty defining and measuring fair value and fair price, leaving this area of the law in disarray. This Article reviews the current framework of appraisal rights and fiduciary duties and proposes refined definitions of fair value and fair price that are based on attractive moral and economic values widely shared by society. The proposal respects the expectations of shareholders and provides guidance …

Worth Its Weight In Gold: Legal Analysis Of The Current Appraisal Of Coal Property In West Virginia, Ryan J. Morgan

West Virginia Law Review

No abstract provided.

Enforcement Of Proxy Regulations In Parent-Subsidiary Mergers

Washington and Lee Law Review

No abstract provided.

Bosland: Estate Tax Valuation In The Sale Of Merger Of Small Firms, Herman L. Trautman

Michigan Law Review

A Review of Estate Tax Valuation in the Sale of Merger of Small Firms. By Chelcie C. Bosland.

Federal Taxation - Tax Aspects Of Corporate Buy And Sell Agreement, Joel D. Tauber S.Ed.

Michigan Law Review

It is the purpose of this comment to consider the tax problems connected with both types of "conventional" corporate buy and sell agreements. It should be recognized, however, that there are many questions of local law and business necessity that also exert influence on the use of such agreements.

Partnerships - Valuation Of Assets On Death Of A Partner, John F. Dodge, Jr. S.Ed.

Michigan Law Review

There are three phases to the problem of arriving at a final dollar and cents valuation of a deceased partner's share in a partnership. In their proper chronological order they are: a determination of what the partnership assets are, a valuation of those assets once determined, and a division of the remainder (after liabilities have been subtracted) into the proper proportions according to the partnership agreement. Only the second phase is within the scope of this comment, the purpose of which is to examine various asset valuation methods both with respect to, and in the absence of, a valuation established …

Corporations-Theory Of Organizational Franchise Taxation- Michigan Franchise Tax, Charles Hansen S.Ed.

Michigan Law Review

The present inquiry, besides delving into the nature of corporate organizational franchise taxation, will also seek to arrive at a logical theoretical basis for two of the more common types of such levies, and will conclude by examining the pertinent Michigan statutes in the light of such theories.