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The universe of theoretically potential buyers was limited.
Although Rose was the smallest of the top five discount brokerage
firms, its business represented a 2.8-percent market share of
discount brokerage customers. Petitioner, on the other hand, was
the largest of the discount brokerages, and its nearest
competitor, Fidelity, had a 17.8-percent market share. Because
of the relatively large number of customers serviced by Rose, it
is unlikely that any discount brokerage other than the top few
would have the operating capacity or ability to absorb and
effectively and profitably use such a large customer base. It
was the potential for customer capacity and the potential synergy
of customer absorption that made the large discount brokerages
the willing buyers and produces the benchmark for the fair market
value of Rose’s customer accounts. Respondent would have us
ignore this established fact and value the accounts in a manner
that would give value to assets that were of no import to
potential purchasers.
Rose’s customers represented its only income-generating
asset. Rose’s infrastructure and name would be of no consequence
or interest to potential buyers, who, of necessity, had to be
larger entities with successful operations and name recognition.
Under these circumstances, respondent’s expert’s going-concern
approach to value is incongruous and unhelpful.
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