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achieve cost savings but would also increase sales. When asked
during trial if he would sell Schlegel UK at the value at which
he arrived from his calculations, Gooch responded: “I probably
wouldn’t have sold it [for $21 million] because it was worth more
to me, the seller, yes. I probably would not have sold it for
that.” Accordingly, we reject petitioner’s proposed valuation of
Schlegel UK as not the value at which the company would have
changed hands between a willing seller and a willing buyer.
Reliance solely on a stand-alone value and application of the
small company risk premium and company-specific risk premium are
not justified by the evidence in this case.
We also disagree with respondent’s proposed valuation
because too much reliance is placed on the synergistic valuation
of Schlegel UK, resulting in an unrealistically high value. In
selecting beta for the DCF calculation in his original report,
Shapiro selected a low beta, and, in his rebuttal report, he
actually used a beta of .5 that was below the range of betas for
purportedly comparable companies. He also did not address the
appropriate royalty rates or properly consider the economic
conditions in the United Kingdom on the valuation date. Just as
determination of fair market value requires assumption of a
willing seller, it does not assume hypothetical transactions that
are “unlikely and plainly contrary to the economic interests” of
a hypothetical buyer. See Estate of Hall v. Commissioner, 92
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