Estate of Mildred Green, Deceased, Thomas R. Green, Executor - Page 30

                                       - 30 -                                         
               We are unpersuaded by Mr. Herber’s conclusions.  In the                
          first instance, his recommended 25-percent marketability discount           
          is very nearly at the rock bottom (rather than at the “slightly             
          lower end”) of the 24- to 45-percent range he says is indicated             
          by the restricted stock studies he analyzed.  Furthermore, we               
          question his 24-percent lower range limit.14  He himself states             
          that most of the restricted stock studies showed median                     
          marketability discounts in a range from 30 to 35 percent.                   
               In his analysis of the Management Planning, Inc. study, Mr.            
          Herber compared RBI with the grouping of companies with gross               
          incomes of $10 to $30 million.  The transactions involving those            


               14 Mr. Herber cites only two studies that he says indicate             
          median discounts of 24 percent or lower.  One of those studies is           
          the Securities and Exchange Commn. Institutional Investor Study             
          (SEC study).  See Securities and Exchange Commn., Institutional             
          Investor Study Report, H.R. Doc. 92-64 (Vol. 5), 92d Cong., 1st             
          Sess. (1971).  On cross-examination, however, Mr. Herber was                
          unable to respond satisfactorily to the estate’s contention that            
          the SEC study describes various categories of sales transactions,           
          and that the category for nonreporting over-the-counter                     
          companies, which are most comparable to smaller businesses like             
          RBI, shows a median price discount of 32.6 percent.                         
               Mr. Herber also relied on the “Hall/Polacek study” which, in           
          his opinion, indicated a mean discount of 23 percent.  See Hall &           
          Polacek, “Strategies for Obtaining the Largest Valuation                    
          Discounts,” Estate Planning (Jan./Feb. 1994).  The Hall/Polacek             
          study also indicates, however, that “Lack of marketability                  
          discounts appear to increase as the capitalization of the                   
          corporation decreases below $50 million (30%-40%) compared to               
          corporations with capitalizations in excess of $100 million (10%-           
          20%).”  Id. at 43-44.  Because RBI’s capitalization was below               
          $50 million, the Hall/Polacek Study would appear to indicate a              
          higher discount (30 to 40 percent) than the mean discount of 23             
          percent upon which Mr. Herber relied.                                       




Page:  Previous  14  15  16  17  18  19  20  21  22  23  24  25  26  27  28  29  30  31  32  33  Next

Last modified: May 25, 2011