Analyzing Chancery Decisions On Long-Term Growth Rates
By Toby Reiff and Josh Reder ( September 17, 2018, 11:30 AM EDT) -- Decisions issued by the Delaware Court of Chancery illuminate the court's perspective on a number of specific legal and financial topics under dispute. In certain cases involving business equity valuations, the court's decision will necessarily delve into business valuation matters, addressing fundamental differences between petitioners' and respondents' experts' valuation conclusions in order to explain the court's decisions and remedies. Within this subset of court decisions, certain disputes feature disagreements between valuation experts regarding the applicable long-term growth rate to be used in a discounted cash flow, or DCF, analysis to determine the fair value of the subject company. In these cases, the court's written decisions provide deeper insight into its selection of an appropriate long-term growth rate and the associated rationale....
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