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potential for a synergistic buyer, concluding that synergies only
increased the value of Schlegel UK by a small amount. Shapiro
was of the opinion that Schlegel UK should be valued as if it
would be purchased by a synergistic buyer.
The fair market value of property should reflect the highest
and best use to which the property could be put on the date of
valuation. See Stanley Works & Subs. v. Commissioner, 87 T.C.
389, 400 (1986). Petitioner, relying on the expert report of
Gooch, argues that the likelihood of a synergistic buyer’s
purchasing Schlegel UK was no greater than a stand-alone
scenario, but petitioner maintains that it considered both
scenarios in arriving at the fair market value for Schlegel UK.
We are not persuaded that petitioner adequately considered
the potential for synergies in valuing Schlegel UK. There were
six potential synergistic buyers of Schlegel UK. Yet,
petitioner’s application of the DCF method and market multiple
approach relied significantly on a small company risk premium, a
company-specific risk premium, and numerous cash-flow assumptions
more appropriate for a stand-alone valuation. Button did not
value Schlegel UK with synergies, and, when Gooch purportedly
valued Schlegel UK with synergies, he used the same revenue
projections he used in the stand-alone analysis and did not make
the necessary adjustments to the discount rate to reflect the
benefits of synergies. A synergistic buyer would not only
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