Ben Byrd’s article Dissenters’ Rights: Litigating “Fair Value” was published in the April 2017 Issue of The Litigator.  Click Here for Full Article published by the Atlanta Bar Association.

You buy insurance to protect your business (or you, personally) from claims. When a claim is covered by the terms of the policy, insurers have two separate duties: (1) to defend you; and (2) to pay damages. If there is an accident, you expect your insurer will perform these duties: hire a lawyer to defend you and pay lawfully proven damages, if any.

You become aware someone has been injured on your property, or claims your product has caused harm, or was injured in an accident with one of your employees. You notify your insurer and believe the claim will be handled. Then, you receive a letter from your insurer, indicating the insurer is investigating the claim and will hire a lawyer to defend you—but that it is reserving its right to change its mind—meaning that it can decide later to stop paying the lawyer or to refuse to pay the claim. You have received a “Reservation of Rights” letter (“ROR” letter ).

FIRST THINGS FIRST – DO NOT IGNORE THE ROR LETTER.

“ROR” letters are often long and complicated. They recite facts, contain excerpts of policy language, and state the insurer’s contentions. Although reading it and understanding it may be challenging, you should not ignore a ROR letter.

If you do not respond to the insurer’s letter, your lack of response will be taken as an implied agreement to the insurer’s contentions, as well as your acceptance of the services of the lawyer hired by the insurer under whatever terms the insurer outlines in the ROR letter. Furthermore, the letter may ask you to provide more specific information to aid the insurer’s investigation. Such cooperation is required under the insurance policy and requests should be responded to promptly.

Instead, you will want to have your attorney review the ROR letter, the policy, and the facts of the claim.  Based on that review, your attorney can advise you how to best respond to the ROR letter, including:

• challenging any unsupported or incorrect assertions;
• seeking withdrawal of the reservations;
• negotiating a non-waiver agreement; and/or
• initiating or defending coverage litigation.

THINGS TO LOOK FOR WHEN REVIEWING THE ROR LETTER.

There are certain requirements for an effective reservation of rights.

First, the ROR letter must “fairly inform” you of the insurer’s position and the specific basis for the insurer’s reservations about its coverage. The language of the ROR letter must be unambiguous. If it is ambiguous, the letter will be construed strictly against the insurer and liberally in your favor. A well-written ROR letter should tie the facts to the cited policy provisions and explain why the insurer believes those facts and policy provisions may result in no coverage.

Some issues affecting coverage may be known from the outset of a claim, e.g., the insured’s failure to give the insurer timely notice of the claim. Possible defenses based on issues known to the insurer should be listed and explained in the ROR letter. The insurer’s failure to list specific defenses it intends to assert may result in a waiver of the insurer’s defenses. However, other defenses to coverage may arise as the evidence is developed, e.g., where there is an exclusion in the policy and facts are learned later that support the exclusion. An insurer is afforded some time to investigate and analyze the circumstances before being required to provide the full basis for its coverage position. If those facts are not known at the outset of a claim and are learned later, the insurer may send a new or amended ROR letter.

Waivers of the insurer’s defenses are uncommon and even disfavored under Georgia law; however, arguing for a waiver can be highly important to you. If the insurer has waived its coverage defenses, you may be entitled to payment of all of your attorney’s fees and full payment of claims, up to the dollar amount of coverage you purchased.

In addition, you and your attorney should carefully review a ROR letter to:

• determine if the ROR letter is timely;
• verify that the dates, coverage amounts, and facts recited in the letter are accurate;
• compare the policy language in the letter to your policy, assuring the language is the same and noting errors or incomplete selections;
• determine if the insurer is reserving its rights to deny coverage of the entire claim or just a part;
• determine if the same facts would be used to determine your liability for damages and the coverage issues; and
• look to see if the insurer is claiming the right to make you reimburse it for the fees of the lawyer it hired to defend you.

You May Have a Right to Your Own Independent Counsel.

Most insurance policies allow the insurer to control the defense of the case and to select the attorney to defend the case. The lawyer hired by the insurance company is deemed to have an attorney-client relationship with both the insured and the insurer. Usually, joint representation of both the insured and the insurer is not a problem because the interests of the insured and the insurer are aligned. However, when the insurer defends and retains counsel under a ROR letter, the interests of the insured and the insurer may differ. If the differences between the interests of the insured and the insurer are: significant (not merely theoretical) and, actual (not merely potential), the insurer may have an obligation to pay for “independent counsel” to represent you, the insured. Under those circumstances, independent counsel is usually the attorney who normally represents your business or you, individually.

In addition, where the insurer chooses the lawyer to represent you, that lawyer may have an on-going business relationship with the insurer—which may result in a potential conflict of interest for that lawyer. The lawyer’s desire to receive additional work from the insurer may result in a conscious or subconscious steering of the claims to benefit the insurer rather than you, the insured —especially if there are truly conflicting interests. For example:

• Where there are multiple claims, some potentially covered and some potentially non-covered, the lawyer retained by the insurer may consciously or subconsciously conduct the investigation and development of the evidence in a way that makes it more likely that the jury’s verdict would award damages on the non-covered claims rather than those claims for which the insurer is obligated to provide coverage.

• If the policy excludes coverage arising from certain conduct and the insurer reserves the right to disclaim coverage based on whether that conduct occurs, there is a conflict of interest: you will want to show that any legitimate damages resulted from covered acts and the insurer will want to show that damages arise from your acts within the exclusion.

Where there is the potential for such a conflict of interest, some courts have ruled that the insurer must pay for independent counsel selected by the insured to handle the defense. Those courts recognize that the lawyer retained by the insurer cannot represent truly serious conflicting interests. The ultimate question is whether, under the facts and circumstances of a particular claim, the insurer’s reservation of rights renders it impossible for counsel selected by the insurer to defend both the interests of the insurer and those of its insured.

If the ROR letter creates a serious and actual conflict between your interests and those of the insurance company, you should ask the insurer to provide independent counsel. In Georgia, the independent counsel issue is not fully resolved. In 1963, a Georgia court held that attorneys, whether or not paid by insurance companies, owe their primary obligation to the insured they are employed to defend (i.e., you, not the insurance company). In 1989, a federal court held that the insurer must choose between denying a defense to the insured or providing a defense in cooperation with counsel retained by the insured and paid for by the insurer.

The ROR Letter May Contain a Requirement that You Reimburse Defense Costs.

The ROR letter may assert that you will be required to reimburse the insurer for attorney’s fees and other defense costs if it later determines there is no coverage. Your insurance policy may already obligate you to do this—however, if it does not and you fail to object to this requirement when presented in the ROR letter, the insurer will argue that your failure to object constituted a new agreement to reimburse the insurer for these fees and costs.

RESPONDING TO THE ROR LETTER.

Once you have reviewed the ROR letter, you should respond to the insurer in a timely manner. Your silence could be used against you. The response should:

• state that you are reserving all of your rights under the policy;
• state that you will cooperate and will provide the information the insurer requested to the attorney the insurer retained to defend you;
• correct any errors as to dates or facts set forth in the ROR letter;
• identify any misquoted or omitted policy language that is beneficial to you;
• state your disagreement with the insurer’s contentions;
• reserve the right to hire independent counsel (at the insurer’s expense), if there is a conflict of interest; and
• challenge the insurer’s effort to have you reimburse it for defense costs, unless that right is already given to the insurer in the policy.

COVERAGE LITIGATION AND NON-WAIVER AGREEMENTS.

If the insurer flatly denies coverage, you will have no insurance coverage for the claim you submitted to your insurer. You would need to hire a lawyer and fund the payment of any settlement or verdict. If, however, you have a good faith belief that the insurer acted wrongly in denying  coverage, you may sue the insurer, alleging a breach of the insurance contract and seeking recovery of all your losses, including all of the fees paid to defend the case, the amount of any settlement or verdict paid, and possibly the fees incurred in proving the insurer breached the contract of insurance.

If the insurer agrees to defend under a reservation of rights, but you reject the insurer’s reasoning, you and the insurer could enter into an agreement expressly stating: that the insurer is not waiving its coverage defenses; that the insured preserves its right to demand coverage; the terms under which the insurer would defend the claim (such as who controls the defense, how strategy is determined, if settlement is pursued how it would be funded); that the lawyer retained by the insurer and paid by the insurer owes loyalty only to the insured and has a duty to protect the insured’s confidential information from disclosure to the insurer; whether separate counsel is required (and, if so, how legal bills are reviewed and paid); and, the rights of the parties once the claim is resolved (e.g., whether the insurer is entitled to reimbursement of defense costs paid). This agreement is called a “Non-Waiver Agreement”.

If there is a dispute over coverage and it is not possible to enter into a non-waiver agreement, the insurer must then file a separate action, called a “Declaratory Judgment Action,” asking the judge to review the matter and declare if there is coverage for the claims. You would be a defendant in that action and would need to hire your own attorney to convince the court there is coverage.

MAKE SURE THE INSURER’S LETTER IS CONSISTENT WITH YOUR POLICY AND THE LAW.

If you receive a ROR letter, your attorney should review the ROR letter, the policy, and the facts of the claim and advise you how to best respond. If we may be of assistance, contact Mike Reeves at mreeves@fh2.com or (770) 399-9500.

Both of our litigators, Mike Reeves and Ben Byrd, have been recognized as Georgia Super Lawyers for 2017.  Their primary area of practice is Business Litigation. Mike has received this recognition many times.  This year marks the first time Ben Byrd has been included in the list of Super Lawyers.  He was included among Georgia Rising Stars in 2014.

For more information on Mike, his practice and his accomplishments, Click Here.        For more information on Ben, his practice and his accomplishments, Click Here.

What are dissenters’ rights, and why do they exist?

There is a general feeling among transactional lawyers that corporate shareholders are becoming more and more likely to assert their right to “dissent” from a corporate transaction and liquidate their shares. While it is hard to prove or disprove whether this feeling is accurate, it is nevertheless useful to understand the nature of the right to dissent and to examine some of the issues these claims present in litigation.

In an earlier era, corporate law required shareholders to vote unanimously in favor of major changes to a corporation’s structure or operations. As a result, a single shareholder could thwart a deal, regardless of how good it was for the entire ownership. On the other hand, the unanimity rule protected the individual shareholders, who had no legal right to liquidate their shares in the face of a transaction they did not like. Over time, though, the unanimity requirements were loosened, and today a simple majority of shareholders can make most corporate decisions. In theory, this change gave a company’s ownership the flexibility it needs to take advantage of opportunities that might otherwise be missed because of single holdout. But with that flexibility came the risk that controlling shareholders will exercise their power at the expense of the minority.

Two scenarios are distressingly common. Imagine that Tom, Dick, and Harry are equal owners of Pin Heads, Inc., which owns a chain of bowling alleys. If Tom and Dick decide to cut Harry out of the business against his will, all they have to do is form another corporation without Harry and then vote to sell Pin Heads’ assets to the new entity, leaving Harry out in the proverbial cold.^[1] This is the classic “freeze out” or “squeeze out” situation. Worse, if Tom and Dick sell Pin Heads’ assets to their new company for less than market value, they haven’t just frozen Harry out of the operation, they have stolen his equity as well.

Consider another scenario: Pin Heads has done well and is now worth $3 million. Our three shareholders reasonably expect to receive $1 million each if the company is sold. Because they are in control, Tom and Dick negotiate the sale of the company’s assets to an unrelated buyer for just half a million dollars, which will eventually be distributed to the shareholders equally. At the same time, Tom and Dick negotiate sweetheart agreements with the buyer just for themselves. These agreements might require Tom and Dick to provide “consulting” services to the buyer, or not to compete with the buyer, or maybe both. In return for these commitments, the buyer will pay Tom and Dick—you guessed it—$1.25 million each. (Harry, of course, isn’t offered a contract.) Tom and Dick’s agreements may not have any real value to the buyer, but that is exactly the point. The contracts are a sham that Tom and Dick have created to divert money from the buyer to themselves when it  ought to have gone to the corporation as a whole. Harry is again left out in the cold.

To protect Harry and his fellow minority shareholders, most states—including Georgia—passed statutes allowing a shareholder to “dissent” from certain corporate transactions that change the fundamental nature of the business and to liquidate his shares for their “fair value.”^[2] In Georgia, the right to dissent is available both to shareholders of corporations and members of limited liability companies^[3], and it is triggered most often when there is a merger or asset sale.^[4]

When there is such a transaction, the company must notify the shareholder of the transaction and his right to dissent. The dissenting then notifies the company of his intent to dissent.^[5] After receiving notice that a shareholder dissents, the corporation must offer the shareholder what it believes to be the fair value of the shareholder’s interest, along with certain financial information supporting that valuation.^[6] The shareholder can either accept the corporation’s offer or counter with his own valuation. But if the shareholder and the corporation cannot come to an agreement, the corporation must institute a court action to determine the fair value of the dissenter’s shares. The valuation proceeding is a nonjury, equitable hearing, so it must be brought in the superior court.^[7] Although it presents some opportunities for either party to stumble, this basic procedure is not terribly complicated. The bigger challenge by far is proving fair value.

What is “fair value”?

The Georgia Code defines fair value as “the value of the shares immediately before the effectuation of the corporate action to which the dissenter objects, excluding any appreciation or depreciation in anticipation of the corporate action.”^[8] This definition is remarkably circular, and there is almost no Georgia case law expanding the meaning of fair value. However, the little authority that does exist establishes that “a shareholder should generally be awarded his or her proportional interest in the corporation after valuing the corporation as a whole.”^[9] In effect, the “fair value” of a minority interest may be different from the “fair market value” of that same interest.

To illustrate, assume Pin Heads is worth $3 million. On the open market, Harry’s one-third interest in the company would likely be worth less than $1 million. After all, with partners like Tom and Dick, who would want to buy Harry’s shares? But under the dissenter’s rights statute, Harry would be entitled to his pro rata portion of the company’s value, without any discounts to account for the lack of marketability or control associated with his individual shares—that is, $1 million.^[10] This is an important point, but it still leaves us with the task of determining the value of the company as a whole.

Because there is so little Georgia authority on this point, the practitioner must look to other sources for guidance.^[11] Fortunately, it is generally agreed that a dissenting shareholder is entitled to be compensated for what he has lost, which is an interest in a “going concern” and not just a share of the corporation’s liquidated assets. As such, he is entitled to his share of the company’s “intrinsic” value—that is, the present value of all future benefits that would flow to the company’s owners from its operations—not just the price the company would bring if it were sold.^[12]

This conceptual difference between intrinsic value and market value is not always obvious to parties or to courts. Moreover, the distinction is blurred by the fact that, as a practical matter, the intrinsic value and market value of a given company will often coincide (a point we will return to below). Nevertheless, the practitioner must remember that these are two distinct measures of value.^[13]

Proving Value: Cash flows and multiples.

Business valuation is an established field that exists separate and apart from any role it plays in dissenters’ rights cases, but its tools are essential to the dissenters’ rights process.^[14] The litigator must be comfortable enough with business valuation techniques to understand why each expert has chosen a given tool and how his conclusions would change if a different tool were used.

Mainstream valuation theory rests on the idea that the intrinsic value of any financial asset, such as a share of corporate stock, is the product of the expected cash flows its owner will receive, on a risk-adjusted basis. Therefore, the value of a business is a function of the money it is expected to make in the future, not the money it has made in the past. This can seem counterintuitive, especially because we are accustomed to hearing businesspeople and financial analysts speak about companies’ values in terms of some multiple of their past revenues or profits. But it is important to remember that these multiples are a reflection of the likelihood that a company’s past performance (good or bad) will continue in the future. So, even when it is defined in terms of past performance, value is still fundamentally about the future.

Business valuation, then, is inherently forward-looking, and this forward-looking orientation distinguishes it from other related disciplines. Accounting, for example, is a system for recording financial transactions that have already happened, so by its very nature it is backward-looking. This is not to say that accounting is not a part of valuation. In fact, accounting information is absolutely necessary for valuation. But financial statements and other accounting data on their own are merely necessary for performing a proper valuation. They are never sufficient.

The business valuation profession recognizes various approaches for valuing a company. Two of these approaches—the “income approach” and the “market approach”—are typically the most useful for determining the value of company as a going concern. Within these approaches there are various methods, but as a practical matter the litigator will generally only encounter three of them.

Under the income approach, the “discounted cash flow” (or “DCF”) method is the one most commonly encountered in litigation matters. A DCF analysis is used to forecast or project a company’s future cash flows—and therefore its intrinsic value—directly. It involves two steps: First, the expert must identify (or produce) reliable projections of the company’s future cash flows. Then, she must “discount” those earnings to their present value in order to take into consideration the time value of money and the risk that the expected cash flows may never materialize.

The DCF method is widely accepted, so much so that an expert must have a good reason for not performing a DCF analysis or risk having his opinions as a whole discarded.^[15] Nevertheless, the DCF method is not flawless. For one thing, it is generally disfavored for the expert to create his own projections for the purpose of performing a DCF analysis. It is far more credible for the expert to use projections that were created either by company management or by a third-party for reasons unrelated to the litigation.^[16] But not every company has projections that are independent of the litigation matter, so often a DCF analysis simply can’t be done.

Even if projections are available, some caution must be exercised before they are blindly adopted by an expert. For a DCF analysis to have any value, the projections that are used must be both reliable and current as of the valuation date.^[17] If favorable projections exist, a dissenting shareholder can almost be certain that the company will claim there was some reversal of fortune between the date of the projections and the date of the valuation that renders the projections useless. Similarly, if the projections were created primarily to attract investors and not to guide management decisions, it is very possible that they are unreasonably optimistic and so can’t be used without some sort of adjustment.^[18] It is the litigator’s job to determine, through careful fact discovery, the reliability of any projections before they become the basis of an expert’s opinion. Again, although the DCF method is not always available, it must always be considered.

In contrast to the DCF method (and income approach generally), the market approach is an indirect measure of value. The market approach assumes that markets are reasonably efficient and therefore the prices at which companies (or shares of companies) sell are generally an accurate reflection of their intrinsic value. There are different methods under the market approach, but at a high level they all contain the same basic elements. First, the expert identifies companies that are similar or “comparable” to the company in question. By comparing the market value of these companies to some common financial metric, such as earnings, the expert can create a ratio or “multiple,” which can then use to estimate the market value of the subject. For example, if we wanted to value our fictional company Pin Heads, our expert would first look at companies similar to Pin Heads that have recently sold. If companies similar to Pin Heads have recently sold for three times their annual earnings, our expert can then infer that Pin Heads would also sell for three time its annual earnings.

There are two principal methods for applying the market approach. One uses publicly traded companies as comparables (the guideline public company method), and the other looks at sales of privately held companies (the guideline merged and acquired company method). Both methods present similar challenges. The first of these is identifying which companies, if any, are truly “comparable” to the business at issue. If you are trying to value a company that owns bowling alleys, you aren’t likely to find another chain of bowling alleys that has sold recently, so you will have to cast your net more widely. Would a chain of go-cart tracks be sufficiently similar to the bowling alley business? What about amusement parks? Unfortunately, there is no objective measure of comparability, and you will quickly find that a certain amount of subjectivity is unavoidable. An unscrupulous expert can use his discretion to select comparables that push the data toward a conclusion that favors his client.

The second challenge is creating the right multiple. Even if an expert has chosen comparable companies that are in the same general business as the subject company, they will differ from each other (and the target company) with respect to fundamental financial characteristics, such as their size, growth potential, and riskiness. Each of these differences will affect a company’s future prospects, so the expert cannot just simply calculate the comparable companies’ multiples and then mechanically apply the average to the subject company. Instead, she should try to determine how, and to what degree, the subject company differs from those in her set and adjust her final multiple accordingly. In theory, an expert might consider an elaborate multi-variable regression analysis to identify which fundamental characteristics have an effect on value and the relative significance of each. In practice, this almost never happens, and multiples must be adjusted by less formal methods. Unfortunately, an expert often adjusts his multiples by relying only on his own subjective “judgment.”^[19] The opportunities to abuse this process are obvious.

This discussion may seem to paint an unfairly cynical picture of valuation practice. After all, these techniques guide the allocation of enormous sums of capital in the financial markets, and they are regularly accepted as valid by courts in all sorts of cases involving the value of businesses. Nevertheless, the litigator is wise to remember that valuation is ultimately as much “art” as it is “science.”^[20]

The role of transaction price and other considerations.

While a dissenter’s case almost always involves a battle of valuation experts, one factor that can never be ignored is the transaction price—that is, the price that the buyer has actually paid to acquire the business in question. If markets were perfectly efficient, with all parties having perfect knowledge and negotiating at arm’s length, we would expect the purchase price to track a company’s intrinsic value very closely, if not match it exactly. And even without perfect efficiency, market forces do push transaction prices toward intrinsic or fair value. Courts recognize this, and they often rely heavily on transaction price when assessing fair value.

The Delaware courts, for example, have repeatedly held that “the fact that a transaction price was forged in the crucible of objective market reality (as distinguished from the unavoidably subjective thought process of a valuation expert) is viewed as strong evidence that the price is fair.”^[21] The apparent objectivity of transaction price has led more than one court to discount the opinions of the parties’ experts entirely and rely solely on transaction price when determining the fair value of a company.^[22]

Not every deal, however, will lead to a transaction price that approximates fair value. For example, the magic of finance often creates opportunities for “synergy”—that is, where the combination of two companies is more valuable than the sum of its two parts standing alone. Synergy is often a prime motivator in acquisitions, and if a buyer can create synergies by acquiring the target company, it may be willing to pay more than what the target company, standing alone, is worth to its current owners.^[23] In that case, the deal might result in a transaction price that is higher than the target’s intrinsic value.

Conversely, a company’s controlling shareholders might be willing to accept less than fair value for the company as a whole if they can structure the deal so they benefit in some way other than receiving their share of the transaction price (for example, by entering into valuable personal contracts with the buyer). In that case, the deal might result in a transaction price that is lower than the target’s intrinsic value. In the end, transaction price can be very important evidence of fair value, but only “so long as the process leading to the transaction is a reliable indicator of value and [transaction]-specific value is excluded.”^[24]

Again, the dissenter’s rights statute does not account for transaction price or, for that matter, any other factor that may weigh on the issue of fair value. But as a practical matter transaction price looms over every judicial appraisal of fair value. Therefore, from the shareholder’s perspective, it isn’t sufficient just to assert that the company was worth more than what was paid for it, even if that assertion is supported by a gold-plated expert report. The shareholder must also carry the implicit burden of showing there was some defect in the transaction, such as self-dealing, that resulted in a sale for less than fair value.

Better yet, the dissenter will also prove how the missing value was diverted, in whole or in part, to the controlling shareholders. If the controlling shareholders accomplished this through contracts with the buyer, the dissenter should be prepared to offer expert testimony regarding the true value of the controlling shareholders’ promises under the contract. (This may require the dissenter to retain a second expert with expertise in executive compensation or related areas.) Again, none of these elements are literally required by the dissenter’s statute. But without this showing, it is hard for even the best expert opinion to prevail over transaction price.

This paper can only scratch the surface of the issues that will confront the litigator in a dissenters’ rights case. For understanding valuation in general, Investment Valuation by Aswath Damodaran and Financial Valuation by James Hitchner are both essential resources. Likewise, The Lawyer’s Business Valuation Handbook by Shannon Pratt and Alina V. Niculita is useful for understanding how these principles are applied in business disputes.

If you have any questions about dissenters’ rights or the fair value of your share in a company, please contact Ben Byrd at bbyrd@fh2.com or (770) 399-9500 to discuss further.

**********

^[1] See Note, Freezing Out Minority Shareholders, 74 Harv. L. Rev. 1630 (1961); Schreiber v. Burlington Northern, Inc., 472 U.S. 1, 3 fn. 1 (1985)(discussing squeeze-out mergers).

^[2] The history and theory behind dissenter’s rights is treated at length in Barry M. Wertheimer, The Purpose of the Shareholders’ Appraisal Remedy, 65 Tenn. L. Rev. 661 (1998).

^[3] O.C.G.A. § 14-2-1301 et seq. (corporations); O.C.G.A. §  14-11-1001 et seq. (LLCs). Because the two statues are substantively identical, we will refer only to the Business Corporation Code.

^[4] O.C.G.A. § 14-2-1302.

^[5] O.C.G.A. § 14-2-1320 to 1324.

^[6] O.C.G.A. § 14-2-1325.

^[7] O.C.G.A. § 14-2-1330(b).

^[8] O.C.G.A. § 14-2-1301(5).

^[9] Blitch v. Peoples Bank, 246 Ga. App. 453, 457 (2000).

^[10] Id.

^[11] Delaware in particular has a well-developed body of case law on the issue of fair value in the context of dissenter’s rights. Further, the Georgia statute is based on the original Model Business Corporations Act, the comments to the Model Act are useful as guidance. Blitch v. Peoples Bank, 246 Ga. App. 453 (2000). Although the Model Act has been amended since the Georgia statute was passed, the Georgia Court of Appeals has even looked to the changes in the Model Act for guidance. Id.

^[12] See Cede & Co. v. Technicolor, Inc., 542 A.2d 1182 (Del. 1988)(equating “fair value” and “intrinsic worth”). In Atlantic States Construction, Inc. v. Beavers, 169 Ga. App. 584 (1984), the Georgia Court of Appeals adopted intrinsic value as the standard for fair value. However, that opinion is only physical precedent, and it has been abrogated in other respects by later opinions. Blitch, 246 Ga. App. at 457 fn. 21.

^[13] See Cede & Co., 542 A.2d at 1188 fn. 8 (noting that market price may not reflect intrinsic value).

^[14] The current version of the Model Business Corporations Act, for example, provides that fair value is to be determined “using customary and current techniques generally employed for similar businesses in the context of the transaction requiring appraisal.” MBCA, § 13.01(4)(ii).

^[15] See, e.g., Lippe v. Bairnco Corp., 288 B.R. 678, 689 (S.D.N.Y. 2003) aff’d, 99 F. App’x 274 (2d Cir. 2004); In re Med Diversified, Inc., 334 B.R. 89 (Bankr. EDNY 2005).

^[16] See In re ISN Software Corp. Appraisal Litigation, 2016 WL 4275388 at *5 (Del. Ch. 2016)(experts’ creation of projections “inherently less reliable than using long-term management projections”); In re Radiology Assocs., Inc. Litig., 611 A.2d 485, A.2d 490–491 (Del. Ch. 1991)(discussing need for projections not created by expert).

^[17] See Highfields Capital, Ltd. v. AXA Financial, Inc., 939 A.2d 34 (Del. Ch. 2007)(favoring DCF that relied on current management projections over analysis that relied on outdated projections).

^[18] See In re Appraisal of Ancestry.com, Inc., 2015 WL 399726 (Del. Ch. 2015)(rejecting valuations based on projections that were not created in the ordinary course of business, but only to attract buyers).

^[19] See, e.g., Merion Capital, L.P. v. 3M Cogent, Inc., 2013 WL 3793896, at *23 (Del. Ch. 2013)(rejecting expert’s choice of multiples based only on professional “judgment call”); In re IH 1, 2015 WL 5679724 (D. Del. 2015)(rejecting opinion of expert who made “judgment call” to reduce comparable multiples by 50% without any explanation).

^[20] See, Matter of Shell Oil Co., 607 A.2d 1213, 1121 (Del. 1992)(“Valuation is an art rather than a science.”); In re Smurfit–Stone Container Corp. S’holder Litig., 2011 WL 2028076, at *24 (Del. Ch. 2011)(“[U]ltimately, valuation is an art and not a science.”)

^[21] Van de Walle v. Unimation, Inc., 1991 WL 29303, at *17 (Del. Ch. 1991).

^[22] E.g., Union Illinois 1995 Investment L.P. v. Union Financial Group, Ltd., 847 A.2d 340 (Del. Ch. 2003).

^[23] M.P.M. Enter., Inc. v. Gilbert, 731 A.2d 790, 797 (Del. 1999).

^[24] Union Illinois, 847 A.2d at 357.