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In his report, Smith also identified a number of other
factors (apart from tax on built-in gains and stock sale costs)
that he says are normally considered in calculating a
marketability discount. For various reasons, however, he
assigned no weight to any of these other factors. For instance,
he assigned no weight to management continuity, because he
believed that C&L Bailey was merely a “holding company”. For a
contrary viewpoint, we need look no further than Smith’s own
report. In the section of his report captioned “Company
Background”, Smith stated that C&L Bailey was founded for “the
primary purpose of owning and operating motel properties” and
that decedent’s grown children managed the motels. Similarly, in
the “Financial Analysis” section of his report, Smith stated that
C&L Bailey “owns and operates two motels”. From his report, we
infer that Smith believes that management continuity would
support an additional amount of marketability discount if C&L
Bailey were considered to be an operating company. As just
noted, Smith’s own report (although internally inconsistent in
this regard), as well as the evidence in the record, fairly
supports a conclusion that C&L Bailey was in fact an operating
company. Hence, Smith’s own report supports a conclusion that
his recommended marketability discount is understated insofar as
it disregards continuity of management.
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