- 46 -
other concern with the presence of this outside stockholder. The
longstanding stock interest of this actual outside investor in
TPC suggests that a hypothetical outside investor would be
interested in an investment in TPC in the nature of the minority
20-percent stock interest held by the estate.
We reject the minority and lack of marketability discounts
used by the estate’s experts.
Turning to respondent’s expert’s valuation, respondent’s
expert appeared to be concerned with numbers only and did not
appear to make an effort to base his valuation of TPC on a real
company. His sterile approach is reflected both in his
comparable public company analysis and in his discounted cashflow
analysis.
In his comparable public company analysis, respondent’s
expert used information on 11 companies which, only in a broad
sense, relate to TPC. Valuation of a company under a comparable
public company method may be simple and quick, but such an
approach also may be easily misapplied. With regard to this
concern, valuation textbooks caution:
The allure of multiples is that they are simple
and easy to relate to. * * *
By the same token, they are also easy to misuse and
manipulate, especially when comparable firms are used.
Given that no two firms are exactly similar in terms of risk
and growth, the definition of comparable firm is a
subjective one. Consequently a biased analyst can choose a
group of comparable firms to confirm his or her biases about
Page: Previous 35 36 37 38 39 40 41 42 43 44 45 46 47 48 49 50 51 52 53 54 NextLast modified: May 25, 2011