- 51 -
We are unable, however, to accept Hahn’s conclusions of fair
market value on the basis of his market approach. Hahn has
derived two “Implied Valuation Multiples”. The first is a
ranking based upon the ratio of selected comparable companies’
sale prices to their most current revenues. The second is a
ranking of the companies’ sale prices to their total book
assets.9 The median sale prices were .68 times annual revenues
and 1.9 times total book assets. Here, however, in his “best
case” scenario, he has ascertained that the Sta-Home tax-exempt
entities would sell at a price only .22 times annual revenues
and, further, that they would sell at a price only 1.1 times
their total book assets. Hahn’s “best case” scenario ranks the
Sta-Home tax-exempt entities next to last in both categories. In
contrast, none of the comparable companies ranks as low in both
categories. Clausen Health Services, for example, sold at a
multiple of .22 times revenues, a ratio close to that ascribed to
the Sta-Home tax-exempt entities. Clausen’s sale price, however,
also represented a price-to-asset ratio of 1.64, ranking seventh
among the comparables. If the Sta-Home tax-exempt entities sold
at this multiple, the indicated fair market value would be
9 It is important to keep in mind that Hahn’s valuation
multiples generated a figure that represented the total asset
value of a company, while Wilhoite’s multiples generated the
value of its invested capital, or MVIC. Thus, application of the
same valuation multiple, say .25, will generally yield different
fair market values, depending upon which method is used.
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