This book provides a clear understanding of the nuts and bolts of
valuation approaches for business investments, including market, income and
asset-based methods. It reviews tools that arbitrators may employ to reach
their final compensation assessment on a principled basis. The book’s many
practical recommendations explore the decision making processes entailed in
three central aspects of the arbitrator’s role:
• advance planning to enhance understanding of expert valuation evidence;
• identification of “apples-to-oranges” miscomparisons; and
• recognition of the true comparability between the business at issue and
other examples offered in the expert evidence.
The presentation focuses not only on the legal standards applicable to the
valuation (full or adequate compensation, reparations, restitution, actual
loss, fair market value, fair or reasonably equivalent value, lost profits,
etc.), but also on the informed judgment and reasonableness that must enter
into the process of weighing the facts of each case and determining its
aggregate significance. The book considers common valuation methods like
discounted cash flows, adjusted present values, capitalized cash flows,
adjusted book values and comparable sales and transactions. Additionally, it
addresses means for arbitrators to assess expert valuation evidence in complex
business investment disputes.
"Best book 2008 of the OGEMID awards!"
Chapter 1 Valuation for Arbitration: An Introduction; Chapter 2 Basic
Valuation Approaches. I. Three Approaches. II. Actual Transaction
Price. III. Limits on Forward-looking Compensation. IV.
Utilizing Several Valuation Methods. V. Market Value. VI.
Contract-Based Damages. VII. Diminution of Value and Business
Interruption Damages. VII. Sunk Investment Costs and Criticism of
Market Value. IX. No Market Exists. X. Subsequent Events. XI.
Common Legal Limits to Compensation. 1. Market Value Too Speculative.
2. Not a Going Concern. 3. Foreseeability. 4. Lack of
Causation and Contributory Fault. 5. Burden of Proof. 6.
Mitigation. 7. Unjust Enrichment and Other Equitable Considerations.
Chapter 3 Comparability I. Timing. II. Public vs. Private. III.
Product and Services Markets. IV. Geographic Location. V. Size.
Capital Structure. VII. Debt and Non-cash Consideration. Chapter 4
Important Components of DCF Valuations. I. Discount Rates. 1.
Build-Up Procedure. 2. Weighted Average Cost of Capital (WACC). 3.
Capital Asset Pricing Model (CAPM). 4. Weighting the Debt and Equity
Capital Costs. 5. Contemporaneous Business Forecasts. II. Direct
Equity vs. Indirect Equity (Total Invested Capital) Methods. III.
Projection Periods. IV. Terminal Value. V. Taxes. VI.
Year-end Conventions vs. Mid-Year Convention. VII. Enterprise Value,
Equity Value and Business Segments. VIII. Double-Counting. IX.
Specific Forecast Items: Non-Operating Assets, Interest, Foreign Exchange Rate
and Minority Interests as Illustrations. 1. Non-Operating Assets. 2.
Interest Rates. 3. Foreign Exchange Rates. 4. Minority
Interests. Chapter 5 Adjusted Present Value (APV) Method. Chapter 6
Capitalized Cash Flow ( CCF ) Method I. Introduction II. Market
Multiples III. Time Periods Chapter 7 Asset-Based Methods,
Particularly Adjusted Book Value I. Introduction II. Historical
Amounts, Intangibles and Goodwill III. Liabilities IV.
Valuations by Categories V. Double-Counting VI. Liquidation
Value Chapter 8 Discounts I. Minority Discount ( DLOC ) II.
Discount for Lack of Marketability ( DLOM ) III. Overlap Chapter 9
Checklist for Interest I. Legal Sources of Interest Calculations II.
Currency III. Fixed or Floating? IV. Day Count V.
Compounding VI. Beginning Dates for Interest Accrual VII.
Miscellaneous Questions Chapter 10 What can the Careful Arbitrator do? I.
Advance Planning II. Ranges of Estimates; Audit Trial III.
Standards of Conduct for Party-Appointed Experts IV. Expert Exchanges
V. Obtaining the Financial Models VI. The Tribunal-Appointed Expert
Appendices: Appendix 1 - List of Current IVSC Members, Observers and
Correspondents. Appendix 2 - AICPA Statement on Standards for Valuation
Services No. 1: Valuation of a Business, Business Ownership Interest,
Security, or Intangible Asset (SSVS No. 1), including the International
Glossary of Business Valuation Terms. Appendix 3 – The Chartered
Institute of Arbitrators Protocol on Instructions to Party-Appointed Expert
Witnesses. Appendix 4 – The Chartered Institute of Arbitrators
Guideline 10 on the Use of Tribunal–Appointed Experts, Legal Advisers and
A great contribution to the field" and a "treasure of insight and