Due to our strong track record – and balance between plaintiff and defendant engagements – The Griffing Group is respected by judges and attorneys nationwide. In fact, we’re frequently retained by attorneys who opposed us in a prior case.
Courthouse
TGG has a strong reputation – and record – in court.

Cases

Case Name:
IN RE ISN SOFTWARE CORP. APPRAISAL LITIGATION
Case Conclusion:
Caption:
Delaware Court of Chancery, C.A. No. 8388-VCG (as appealed: Delaware Supreme Court, No. 43, 2017)
Keywords:
Appraisal Action, Fair Value
Industry:
Software-as-a-Service
Professionals:
David G. Clarke, ASA, Joseph W. Thompson, CFA, ASA, William P. McInerney, ASA

Privately-held ISN Software Corp. experienced substantial growth in the years prior to a 2013 cash-out merger initiated by its founder and controlling shareholder William Addy. Two minority shareholders, Ad-Venture Capital Partners and Polaris, objected to the transaction and filed a petition in the Delaware Court of Chancery seeking appraisal of their shares.

Mr. Addy established the squeeze-out merger consideration of $37,317 per share without assistance from a financial advisor or assurance from a fairness opinion. Instead, Mr. Addy determined the merger consideration by adjusting a third party’s 2011 valuation to reflect his expectations for ISN’s outlook in early 2013. Ultimately, not even Mr. Addy argued that the merger consideration, which implied a total equity value for the company of approximately $135 million, was a reliable indicator of fair value.

The valuation expert retained by Mr. Addy on behalf of respondent ISN argued at trial that the company’s fair value was $106 million — lower, in fact, than the equity value implied by the unreliable merger consideration. In arriving at this value, the respondent’s expert relied in part upon indications of value derived from two transactions of company stock that occurred prior to the merger.

The Griffing Group was retained by counsel for petitioner Ad-Venture Capital Partners. David G. Clarke, ASA, a Managing Principal of The Griffing Group, submitted opening and rebuttal reports and testified at deposition and at trial in February 2016, opining that the company’s fair value was $645 million. The expert for the other petitioner, Polaris, concluded a value of $820 million. In addition to providing traditional valuation analyses such as a discounted cash flow analysis, Mr. Clarke offered a detailed rebuttal of the respondent’s expert’s claim that the two prior transactions of stock provided reliable indications of the company’s value.

In an August 2016 opinion, Vice Chancellor Glasscock rejected the prior transactions of stock (and the merger consideration) as unreliable and determined the company’s fair value by conducting a discounted cash flow analysis that reflected a combination of the inputs used by the experts. The Vice Chancellor ruled that ISN’s fair value was $98,783 per share, or approximately $357 million in total – nearly triple the $135 million value implied by the per-share merger consideration and more triple the $106 million value argued by the respondent’s expert.

The decision was appealed to the Delaware Supreme Court, which in October 2017 affirmed the Chancery Court’s ruling in a one-page order.

David G. Clarke, ASA was assisted by Joseph W. Thompson, CFA, ASA, David Neuzil, CFA, and William P. McInerney, ASA. Petitioner Ad-Venture Partners was represented by Jon E. Abramczyk, John P. DiTomo, and Matthew R. Clark of Morris, Nichols, Arsht & Tunnell LLP.

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Case Name:
CITY OF MIAMI GENERAL EMPLOYEES’ AND SANITATION EMPLOYEES’ RETIREMENT TRUST, ET AL. V. C&J ENERGY SERVICES, INC., ET. AL.
Case Conclusion:
Caption:
Delaware Court of Chancery, C.A. No. 9980-CB
Keywords:
Economic Damages, Fiduciary Duties, Sale Process
Industry:
Oil and Gas Production; Oilfield Servicing; Fracking
Professionals:
William Jeffers, CFA, Joseph W. Thompson, CFA, ASA

In June 2014, a wholly-owned subsidiary of Nabors Industries Ltd. (“Nabors”) agreed to acquire a majority equity interest in a $2.8 billion stock-for-stock merger with C&J Energy Services, Inc. (“C&J”).  The transaction involved the merger of two oil and gas services companies.

In July, the plaintiff, City of Miami General Employees’ and Sanitation Employees’ Retirement Trust, filed a motion to enjoin the defendants from consummating the proposed merger.  The plaintiff alleged that the transaction was a “sale of control,” as C&J shareholders would receive a 47% minority interest in a company controlled by Nabors and incorporated under the laws of Bermuda.  Furthermore, the plaintiff contended that the C&J Board of Directors failed to fulfill its Revlon duties because it approved the Nabors deal based on incorrect and misleading information regarding the Nabors subsidiary and because it analyzed the deal as an acquisition of assets rather than a sale of a controlling equity interest.

William Jeffers, CFA, a Principal at The Griffing Group, issued an expert report which demonstrated that the C&J Board utilized projections from Nabors that were overly optimistic, and that the EBITDA multiples used to justify the fairness of the merger were well above industry averages.  These factors served to overvalue the contribution to be made by Nabors, resulting in a transaction that represented a negative premium for C&J shareholders.

The Court of Chancery ruled in November to enjoin the merger for a period of 30 days, finding that the Board breached its Revlon duties and requiring the Board to solicit competing bids and to compare those bids (if any) with the value provided in the merger with Nabors.  A Special Committee of the C&J Board retained Morgan Stanley to run a solicitation process based solely on publicly available information.  A financially superior bid was submitted by Cerberus, but was rejected by the Board.

In December, the Delaware Supreme Court reversed the ruling of the Chancery Court, holding that the C&J Board satisfied its Revlon duties, despite the fact that it did not disclose the Cerberus bid to shareholders.  Shareholders voted to approve the transaction in March 2015.

The Chancery Court held a hearing in April to consider the dismissal of the Amended Complaint and C&J’s motion to recover damages against the preliminary injunction bond posted by the Plaintiffs.  In August 2016, the Chancery Court dismissed the plaintiff’s case, citing the recent Corwin decision as support for the applying the business judgment rule.

Plaintiffs appealed to the Delaware Supreme Court, and their appeal was denied in March 2017.

William Jeffers, CFA was assisted by Joseph W. Thompson, CFA, ASA and David J. Neuzil, CFA.  The plaintiffs were represented by Stuart M. Grant, Mary S. Thomas, and Jonathan M. Kass of Grant & Eisenhofer P.A.; and Mark Lebovitch, Jeroen Van Kwawegen, and Christopher J. Orrico of Bernstein Litowitz Berger & Grossmann LLP.

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Case Name:
AIR PRODUCTS AND CHEMICALS, INC. V. ERIC P. WIESEMANN, ET AL.
Case Conclusion:
Caption:
United States District Court, District of Delaware, Civ. No. 14-1425-SLR
Keywords:
Economic Damages
Industry:
Industrial Gases
Professionals:
David G. Clarke, ASA, William P. McInerney, ASA

In May 2013, publicly-traded industrial gases producer Air Products and Chemicals, Inc. (“Air Products”) acquired EPCO Carbon Dioxide Products, Inc. (“EPCO”) from founder and CEO Eric P. Wiesemann and other stockholders. EPCO was a privately-held company that produced and distributed liquid carbon dioxide.

After the transaction closed, Air Products brought suit against Mr. Wiesemann and the other selling stockholders for breach of contract, fraud, and negligent representation. The claims related primarily to EPCO’s compliance with U.S. Department of Transportation (“DOT”) regulations governing truck drivers’ hours of service. EPCO employed about 100 truck drivers to deliver liquid carbon dioxide from its 11 plants to customers around the United States. Air Products alleged that EPCO’s management knowingly operated the company in violation of DOT regulations by allowing drivers to continue making deliveries after their daily driving hour limits had been reached. Air Products claimed that EPCO concealed the alleged violations during due diligence, and that after the transaction closed, Air Products was forced to purchase additional trucks and hire new drivers in order to operate the business in compliance with DOT hours of service regulations.

Air Products’ expert calculated damages by comparing the purchase price Air Products paid for EPCO to a lower, alternative estimate of EPCO’s value that took into account the costs that Air Products allegedly would have incurred going forward from the transaction date in order to operate EPCO legally (buying additional trucks and hiring new drivers). The purported damages were therefore equal to the difference between the two amounts; the diminishment in EPCO’s value that would result from incurring the ongoing costs of “curing” the allegedly non-compliant driver management practices that were not disclosed in due diligence.

David G. Clarke, ASA, a Managing Principal of The Griffing Group, was retained by the EPCO defendants to analyze the valuation and damages issues in the case. Mr. Clarke submitted an expert report which demonstrated that even if the violations alleged were true, a detailed analysis of EPCO’s historical truck and driver usage revealed that the company had more than enough capacity in its existing truck fleet and driver corps to cure the violations by reconfiguring the company’s delivery schedule, rather than purchasing more trucks and hiring new drivers. As such, no damages were indicated. In addition, Mr. Clarke pointed out that a review of EPCO’s client billing practices and contracts indicated that even if the company had to incur new transportation costs, these costs could have been passed along to customers (thus nullifying damages). Finally, Mr. Clarke noted that the plaintiff’s expert failed to offer any evidence that Air Products actually incurred any of the purportedly-necessary truck and driver costs after the transaction closed.

Following the issuance of his report, Mr. Clarke testified at deposition and at trial, in June 2016. In February 2017, the Court ruled in favor of the EPCO defendants on all liability counts and awarded no damages to Air Products.

David G. Clarke, ASA was assisted by William P. McInerney. The plaintiffs were represented by Robert S. Saunders, Joseph O. Larkin, Matthew P. Majarian, Jessica R. Kunz, Kathryn S. Bartolacci, and V. William Scarpato, III of Skadden, Arps, Slate, Meagher & Flom LLP.

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Case Name:
JOHN DOUGLAS DUNMIRE, ET AL., V. FARMERS & MERCHANTS BANCORP OF WESTERN PENNSYLVANIA, INC.
Case Conclusion:
Caption:
Delaware Court of Chancery, C.A. No. 10589-CB
Keywords:
Appraisal Action, Fair Value
Industry:
Commercial Banking
Professionals:
Daniel R. Van Vleet, ASA

In October 2014, Farmers & Merchants Bancorp of Western Pennsylvania, Inc. (“F&M”) merged with neighboring community bank NexTier, Inc. (“NexTier”), in a stock-for-stock transaction (the “merger”). The 2.17 stock exchange ratio valued NexTier at $180 per share and F&M at $83 per share. John D. Dunmire and other F&M stockholders (the petitioners) filed an appraisal action seeking the Court’s determination of the fair value of their shares, which they argued was more than the $83 per share value afforded to them in the transaction.

The petitioners’ expert claimed that the fair value of F&M’s common stock was $138 per share, 66% more than the merger consideration. F&M retained Daniel R. Van Vleet, ASA, a Managing Principal of The Griffing Group, who determined the company’s fair value to be $76 per share, about 8% less than the merger consideration. Mr. Van Vleet submitted opening and rebuttal expert reports, and testified at deposition and trial in support of his analysis.

The Court concluded that the fair value of F&M was $92 per share, much nearer to the $76 value concluded by Mr. Van Vleet (and the $83 merger consideration) than the $138 value proffered by the petitioners’ expert. The Court arrived at this fair value by conducting a capitalized net income analysis of F&M. In performing its analysis, the Court determined beta differently than either expert, but otherwise relied entirely on Mr. Van Vleet’s inputs and assumptions, including those for future net income, the risk-free rate, the equity risk premium, the size premium, the perpetuity growth rate, and the company’s excess capital and amortization tax benefits.

The respondent was represented by Kenneth J. Nachbar, Ryan D. Stottmann, and Glenn R. McGillivray of Morris, Nichols, Arsht & Tunnell LLP.

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Case Name:
IN RE GLOBE SPECIALTY METALS, INC. STOCKHOLDERS LITIGATION
Case Conclusion:
Caption:
Delaware Court of Chancery, Consol. C.A. No. 10865-VCG
Keywords:
Economic Damages, Fiduciary Duties
Industry:
Silicon Metal; Silicon-Based Alloys
Professionals:
William Jeffers, CFA, Joseph W. Thompson, CFA, ASA, William P. McInerney, ASA

In February 2015, multinational silicon producers Grupo FerroAtlántica, S.A.U. (“FerroAtlántica”) and Globe Specialty Metals, Inc. (“Globe”) agreed to merge in a $3.1 billion stock-for-stock transaction in which FerroAtlántica received a 57% equity stake in the combined company and Globe stockholders received the remaining 43%.

Globe stockholders filed a class action lawsuit alleging that Globe’s Board of Directors breached their fiduciary duties to stockholders by selling Globe for an inadequate price, and that FerroAtlántica aided and abetted those breaches. The suit noted that the consideration Globe stockholders were to receive – a minority interest in a combined company incorporated in the United Kingdom and controlled by FerroAtlántica’s Spanish parent – represented a significant and unfavorable change to the equity and governance structure that Globe stockholders previously enjoyed.

Counsel for the plaintiff class retained William Jeffers, CFA of The Griffing Group to provide valuation analysis and expert witness testimony. In July 2015, Mr. Jeffers issued an expert report that demonstrated the transaction was unfair to Globe’s public stockholders because the proposed stock swap provided them with a negative premium for their shares, even after accounting for future synergies expected from the merger.

In late August 2015, the Court held a hearing on plaintiffs’ motion for a preliminary injunction. In early September, prior to the Court’s ruling on the motion, the parties entered into a memorandum of understanding which provided settlement terms including a $32.5 million cash payment to plaintiffs and significantly enhanced corporate governance protections for former Globe stockholders at the combined company.

The Court approved the settlement in February 2016. Vice Chancellor Glasscock called the settlement “an excellent result for the stockholders.”

William Jeffers, CFA was assisted by Joseph W. Thompson, CFA, ASA, David Neuzil, CFA, and William P. McInerney.  The plaintiffs were represented by Mark Lebovitch, Jeroen Van Kwawegen, Christopher J. Orrico, and John Vielandi of Bernstein Litowitz Berger & Grossmann LLP; Michael Hanrahan, Paul A. Fioravanti, Jr., Corinne Elise Amato, and Kevin H. Davenport of Prickett, Jones and Elliott, P.A.; Marc A. Topaz, Lee D. Rudy Michael C. Wagner, and Justin O. Reliford of Kessler Topaz Meltzer & Check, LLP; Randall J. Baron and David T. Wissbroecker of Robbins Geller Rudman & Dowd LLP; and Frank R. Schirripa of Hach Rose Schirripa & Cheverie LLP.

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Case Name:
WARBERG OPPORTUNISTIC TRADING FUND L.P., ET AL. V. GEORESOURCES, INC.
Case Conclusion:
Caption:
Supreme Court of the State of New York, Index No. 652332/2012
Keywords:
Economic Damages, Fair Market Value
Industry:
Oil & Gas Exploration
Professionals:
Joseph W. Thompson, CFA, ASA, William P. McInerney, ASA

GeoResources, Inc. was a publicly-traded oil and gas exploration company with operations throughout the United States.  In August 2012, GeoResources was acquired by competitor Halcón Resources Corporation.

Under the terms of the merger agreement, certain warrants on GeoResources shares were to be converted into a mix of “cash” and “equity” warrants on Halcón common shares.  There was a dispute between certain holders of outstanding GeoResources warrants (the Plaintiffs) and GeoReources regarding anti-dilution adjustments to the exercise price of warrants.  As a result of the dispute, the Plaintiffs returned their warrants to GeoResources and demanded payment of the fair market value of the warrants.

Plaintiffs retained Joseph W. Thompson, CFA, ASA, a Director at The Griffing Group, to provide valuation analysis of the warrants. Mr. Thompson submitted an expert report and a rebuttal report regarding the fair market value of the warrants and testified at deposition.  The matter is stayed pending the outcome of Halcón’s bankruptcy proceedings.

Joseph Thompson, CFA, ASA was assisted by William P. McInerney.  The plaintiffs were represented by Gary Svirsky, Brad Elias, and Garo Hoplamazian of O’Melveny & Myers LLP.

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Case Name:
IN RE SAFEWAY INC. SHAREHOLDERS LITIGATION
Case Conclusion:
Caption:
Delaware Court of Chancery, C.A. No. 9445-VCL
Keywords:
Contingent Value Rights, Economic Damages, Fair Market Value, Fiduciary Duties
Industry:
Grocery retailing
Professionals:
William Jeffers, CFA, David G. Clarke, ASA, Joseph W. Thompson, CFA, ASA, William P. McInerney, ASA

On March 6, 2014, an investor group led by the private equity firm Cerberus Capital Management agreed to buy Safeway Inc., the second-largest grocery store chain in the U.S., for approximately $9.1 billion.

The merger sought to combine Safeway with Albertsons LLC, which is owned by Cerberus. The proposed consideration consisted of $32.50 of cash per share plus Contingent Value Rights (CVRs) entitling the holder to a pro-rata share of the proceeds of the sale of the following Safeway assets:

  • A minority interest in Casa Ley, a 200-store grocery store chain in Mexico; and
  • Property Developments, LLC, a real estate development company that develops grocery store locations for Safeway.

Safeway shareholders filed a class action complaint, arguing that Safeway’s Board of Directors had breached their fiduciary duties by allowing the company’s CEO to conduct the sale process despite his interest in remaining CEO of the company following a sale. Plaintiffs further claimed that the director defendants breached their duties by permitting an investment bank selected by the CEO to serve as Safeway’s financial advisor for the sale, despite the bank’s longstanding ties to Cerberus.

Plaintiffs also alleged that by failing to create a special committee to negotiate and value the merger, and by agreeing to accept the Casa Ley and PDC CVRs (which failed to convey meaningful value to the stockholders), the director defendants’ breaches resulted in an inadequate sale price for the company.

On June 13, 2014, the parties entered into a settlement agreement which, among other things, amended several structural components of the CVRs to deliver greater value to Safeway’s stockholders. William Jeffers, CFA, a Principal at The Griffing Group, provided financial analysis to plaintiffs’ counsel in connection with their negotiation of the terms of the settlement and later prepared an affidavit, which was submitted to the Court, explaining the economic benefits of the settlement to the plaintiffs.

Vice Chancellor J. Travis Laster the accepted the value of the settlement as determined by Mr. Jeffers and approved the settlement on September 17, 2014.

William Jeffers, CFA was assisted by David G. Clarke, ASA, Joseph W. Thompson, CFA, ASA, and William P. McInerney. The plaintiffs were represented by Mark Lebovitch and Jeroen Van Kwawegen of Bernstein Litowitz Berger & Grossmann LLP; Stuart M. Grant and Cynthia A. Calder of Grant & Eisenhofer P.A.; Lee D. Rudy and J. Daniel Albert of Kessler Topaz Meltzer & Check, LLP; and Joseph E. White, III, Jonathan M. Stein, and Adam Warden of Saxena White P.A.

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Case Name:
FRANK G. PILKIEWICZ, PH. D., ET AL. V. TRANSAVE, LLC
Case Conclusion:
Caption:
Delaware Court of Chancery, C.A. No. 6319-CS
Keywords:
Appraisal Action, Fair Value, Preferred Stock
Industry:
Pharmaceuticals, Biotechnology
Professionals:
David G. Clarke, ASA, Michael J. Mattson, William Jeffers, CFA, Joseph W. Thompson, CFA, ASA, William P. McInerney, ASA

Transave, Inc. was a privately-held biopharmaceutical company focused on developing drugs for the treatment of lung infections. In December 2010, Transave merged with Insmed, Inc., a publicly traded shell company.

Under the terms of the merger agreement, Insmed acquired all of the outstanding capital stock of Transave and paid off Transave’s debt of $7.8 million. Transave preferred and common stockholders received, in the aggregate, (i) approximately 25.9 million shares of Insmed common stock, (ii) approximately 91.7 million shares of Insmed Series B Conditional Convertible Preferred Stock with a stated value of $0.7114 per share, and (iii) cash consideration of $561,280. After giving effect to the merger, former Transave stockholders held a 46.7% equity interest in the combined company (on an as-converted, fully diluted basis), and Insmed shareholders held the remaining 53.3%.

At the time of the merger, Transave did not have any drugs on the market but was far along in the process of developing an anti-infective, inhaled drug compound with strong commercial prospects. The drug had the potential to become a leading treatment for at least three types of infection, for which few or no competing treatments existed. In order to finish clinical trials and bring the drug to market, however, Transave needed funding. Insmed was a pharmaceutical development company that had sold its technology portfolio and was looking for an opportunity to deploy its cash.

A group of former Transave stockholders brought an appraisal action, seeking the fair value of their common shares. David G. Clarke, ASA, a Managing Principal at The Griffing Group, submitted opening and rebuttal reports and testified at deposition on behalf of the petitioners. The matter settled shortly before trial.

David G. Clarke, ASA was assisted by Michael J. Mattson, William Jeffers, CFA, Joseph W. Thompson, CFA, ASA and William P. McInerney. The petitioners were represented by Paul A. Fioravanti, Jr., Marcus E. Montejo, and Laina M. Herbert of Prickett, Jones and Elliott, P.A. and Richard Feldman and Stephen M. Rosenberg of Rosenberg Feldman Smith, LLP.

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Case Name:
IN RE GOOGLE INC. CLASS C SHAREHOLDER LITIGATION
Case Conclusion:
Caption:
Delaware Court of Chancery, C.A. No. 7469-CS
Keywords:
Economic Damages, Entire Fairness, Fiduciary Duties, Stock Split, Voting Power
Industry:
Internet Services
Professionals:
David G. Clarke, ASA, Michael J. Mattson, William Jeffers, CFA, William P. McInerney, ASA

On April 12, 2012, Google Inc. announced its intention to issue a stock dividend whereby each of its current stockholders would receive one share of Class A voting stock and one share of nonvoting Class C stock for each previously held (voting) Class A share.

The Griffing Group was retained by counsel for plaintiffs, who sought to enjoin Google from completing the recapitalization on the grounds that it would benefit the company’s founders, Larry Page and Sergey Brin (by extending their voting control over Google), while harming minority stockholders (who would be left with a non-voting share that would trade at a discount to its voting counterpart). David G. Clarke, ASA, a Managing Principal of The Griffing Group, submitted opening and rebuttal reports and testified at deposition, opining that the economic evidence supported plaintiffs’ claims.

Just prior to the commencement of the injunction hearing before Chancellor Leo E. Strine, Jr., the parties entered into a settlement agreement pursuant to which the recapitalization would be allowed to proceed, but with certain key protections for minority stockholders. Under the terms of the settlement, if the non-voting shares trade at a discount (measured over one year), Google is obligated to pay holders of the non-voting shares a percentage of the overall trading differential, which could be as high as $7.5 billion. In addition, when the founders’ combined voting power falls below 15%, the non-voting Class C shares will convert to voting Class A shares – thereby regaining voting rights – unless the company’s Board of Directors at the time determines that it is in Google’s best interests to maintain the class of non-voting stock. Finally, the settlement agreement makes it more difficult for the founders to sell or swap their non-voting stock, further ensuring that their economic interests remain aligned with the interests of all Google stockholders. The settlement was approved by Chancellor Strine in October 2013.

David G. Clarke, ASA was assisted by Michael J. Mattson, William Jeffers, CFA, and William P. McInerney of The Griffing Group; and Professor Matthew D. Cain of the University of Notre Dame. The plaintiffs were represented by Jeffery C. Block and Whitney E. Street of Block & Leviton LLP; Laurence D. Paskowitz of The Paskowitz Law Firm P.C.; and Nicholas I. Porritt and Douglas E. Julie of Levi & Korsinsky LLP.

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Case Name:
EDGEWATER GROWTH PARTNERS, LP V. H.I.G. CAPITAL, INC.
Case Conclusion:
Caption:
Delaware Court of Chancery, C.A. No. 3601-CS
Keywords:
Economic Damages, Foreclosure Sale, Sale Process
Industry:
ATM Servicing
Professionals:
David G. Clarke, ASA, William Jeffers, CFA, William P. McInerney, ASA

The plaintiff contested the foreclosure of an ATM servicing company, Pendum, Inc., in the Delaware Court of Chancery, claiming it was not commercially reasonable under the Uniform Commercial Code (UCC) as to the sale process and price, considering the plaintiff’s expert’s valuation and “real world” indications of value.

In its suit, the plaintiff claimed the debt purchaser and its affiliate violated Article 9 of the UCC by staging a sale that was not commercially reasonable in terms of process and price. The defendants argued the plaintiff sued to avoid paying on the $4 million guaranty.

To support its position that the foreclosure price bore no relation to the value of the company, the plaintiff retained a valuation expert who performed a discounted cash flow (DCF) analysis to establish the company’s enterprise value. He also used the guideline public company method and the mergers and acquisitions method to derive valuation multiples for Pendum. The plaintiff’s expert testified that on the date of sale, the company was worth $110 million, significantly more than sale price.

David G. Clarke, ASA, a Managing Principal of The Griffing Group, submitted a rebuttal report and testified at deposition and trial, opining that the report prepared by the plaintiff’s expert contained serious flaws and errors and could not be relied upon in determining the value of Pendum.

Mr. Clarke noted that the expert largely ignored Pendum’s high degree of financial distress. For example, as part of the guideline public company method, the expert used valuation multiples from profitable companies to value Pendum, which was not profitable. In addition, Mr. Clarke identified an error in the expert’s calculations that led to an overstatement (by double) of one of the expert’s valuation multiples. Further, the expert used guideline mergers and acquisitions that were not comparable to Pendum and were missing certain key financial data. Mr. Clarke also identified a number of unreasonable assumptions underlying the expert’s DCF analysis, which was premised upon outdated projections that predicted the company would undergo a dramatic turn-around after restructuring its debt.

Citing Mr. Clarke’s criticisms of the plaintiff’s expert’s report, Chancellor Strine wrote that he “did not come away persuaded” of the $110 million value offered by the plaintiff’s expert, and that the company’s “poor performance and operational mess” showed in the lower value its assets received at the auction. Because the Court concluded the sale was commercially reasonable, the price the buyer paid for the assets was reasonable as well. Ruling for the defendants, the Court required the plaintiff to pay the $4 million it owed under its guaranty.

David G. Clarke, ASA was assisted by William Jeffers, CFA and William P. McInerney. The defendants were represented by Peter J. Walsh, Jeremy W. Ryan, Daniel A. Mason, and Ryan T. Costa of Potter Anderson & Corroon LLP.

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