Thought Leadership

2021 Mid-Year Update: Major Cases and Accomplishments


During the first half of 2021, the Griffing Group was called upon to provide valuation consulting in a variety of high profile matters. Click below to read some examples that highlight the depth and breadth of our expertise:

Delaware Court of Chancery Relies on Bill Jeffers’ Testimony in Denying MAE Claims

The Griffing Group was retained by Bardy Diagnostics, the seller in a $500 million transaction, and its counsel, Wilson Sonsini, in an expedited trial in the Delaware Court of Chancery in May. Medical equipment provider Hillrom attempted to back out of its purchase of Bardy, claiming that a reduction in the Medicare reimbursement rate for Bardy’s cardiac-monitoring technology qualified as a “Material Adverse Effect” (MAE) under the purchase agreement.

Bardy filed suit, seeking a Court order to force Hillrom to close the transaction. Bardy argued that an MAE had not occurred because the risks associated with the Medicare reimbursement were previously known to Hillrom; the change in Medicare rates was specifically addressed in the purchase agreement; and that Hillrom hedged the effect of a reduction of the Medicare rates that would have resulted in lower earn-out payments. Furthermore, Bardy was not disproportionately affected by the change in the Medicare reimbursement rates, compared with similarly situated companies.

The Court relied on the expert testimony of William Jeffers, CFA in ruling that an MAE had not occurred and that Hillrom would have to complete the acquisition as originally agreed. Bill was assisted by Joe Thompson, CFA, ASA and Elise Scoles.

The case is Bardy Diagnostics, Inc. v. Hill-Rom, Inc. et al., Delaware Court of Chancery, C.A. No. 2021-0175-JRS.

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NBA Team Retains Dan Van Vleet for Transaction Valuation Amidst COVID-19 Pandemic

The Griffing Group provided valuation consulting to the owners of an NBA team to assist in structuring several ownership transactions. The engagement began prior to the onset of the COVID-19 pandemic, and over the course of 18 months, Daniel Van Vleet, ASA assisted the owners in analyzing the impact of the pandemic on the value of the team.

In addition to examining valuation multiples paid in NBA team transactions both before and during the pandemic, Dan worked closely with the team’s executives to model the economic damages suffered by the league and the team as a result of lost games, reduced seating capacity, and shifting operating costs. In addition, historical comparisons were drawn to the change in NBA team valuation multiples observed before and after the Great Recession that began in 2008. Dan was assisted by William McInerney, ASA and Paul Skluzak.

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David Clarke Mediates Valuation Dispute Between Deadlocked Shareholders

Valuation experts from the Griffing Group recently served as mediators in a buy-out dispute between the two owners of a multinational manufacturing and distribution company. Pursuant to the terms of the company’s shareholder agreement, each shareholder retained a business valuation firm to determine the fair market value of the company. However, the values concluded by the two firms were too far apart to resolve the dispute. The shareholder agreement stipulated that in such a case, the two valuation firms must select a third, neutral valuation firm to determine which valuation is closer to fair market value.

The Griffing Group was selected by the two national valuation firms to serve as valuation mediator. David Clarke, ASA, with the assistance of Joseph Thompson, ASA, CFA and Paul Skluzak, analyzed the two valuation reports and the company’s performance and concluded that the company’s fair market value was slightly nearer to the value concluded in one of the reports than the other. After completing their analysis but prior to delivering their formal opinion, the experts from the Griffing Group assisted the parties in settling the matter amicably.

The Griffing Group was pleased to be selected by its peers and serve the parties in this important engagement. The firm has a long track record of successful dispute resolution consulting in high-profile matters concerning business valuation and economic damages.

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Bill Jeffers Assists in Petition for Equity Committee in Bankruptcy Proceedings

The Griffing Group was retained by certain equity holders and their counsel, Bragar Eagel & Squire, Fishman Haygood and Smith, Katzenstein & Jenkins, as part of an effort to request that an official equity committee be appointed in the Mallinckrodt Plc bankruptcy proceedings heard in U.S. Bankruptcy Court for the District of Delaware. The Court ultimately ruled that tentative settlements with opioid litigants and the government on Acthar-related litigation effectively wiped out Mallinckrodt’s equity, thus eliminating the need for an equity committee. William Jeffers, CFA provided expert testimony with assistance from David Neuzil, CFA.

The case is In Re Mallinckrodt Plc, et al.,U.S. Bankruptcy Court for the District of Delaware, Case No. 20-12522 (JTD)

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Dan Van Vleet Retained in Complex ESOP Transaction Lawsuit

The Griffing Group has been retained in a major class action matter involving the sale of an equity interest by an employee stock ownership plan (ESOP). In this matter, a complex series of corporate transactions involving S corporations, limited liability companies, and synthetic equity resulted in the purchase of the ESOP’s equity interest by members of company management. The case involves claims for breach of fiduciary duty and violation of the adequate consideration and valuation provisions of ERISA §408(e). Daniel Van Vleet, ASA is providing expert testimony and valuation services in this matter, with assistance from David Neuzil, CFA.

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Class Certification Granted Following Bill Jeffers’ Testimony on Damages

The Griffing Group was retained by Bragar Eagel & Squire and Moore Kuehn to determine the damages associated with contractual breaches by Conduent Educational Services, a student loan processor. William Jeffers, CFA provided expert testimony regarding the damages suffered by the borrowers and the U.S. District Court for the Northern District of New York subsequently certified the class of plaintiffs. Further developments in the litigation are pending.

The case is Jeffrey Chery et al. v. Conduent Education Services, LLC et al., U.S. District Court for the Northern District of New York, Civ. No. 1:18-cv-75 (DNH/CFH).

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Nebraska Supreme Court Affirms Use of Van Vleet Model in $467 Million Award

The Nebraska Supreme Court affirmed a $467 million award that was based on the SEAM adjustment developed by Daniel Van Vleet, ASA. In Ryan Trust v. Ryan, a dispute between shareholders of Streck, Inc., a biotech firm that was organized as a Subchapter-S corporation, the experts for both sides valued the company using an S Corporation Equity Adjustment Multiple (or “SEAM”), a component of the Van Vleet Method for adjusting a company’s equity value from a C corporation basis to an S corporation basis. Since its development in 2001, the Van Vleet Method has become the most widely-used method for addressing the valuation differences between C corporations and pass-through entities such as S corps, LLCs, and partnerships. Valuation professionals use the Van Vleet Method in valuations for tax reporting, financial reporting, transactions, and high-profile shareholder disputes such as the Ryan case.

Dan provided BVWire with the following comments on the use of his method in the case:

“In Ryan, testimony was provided by two nationally recognized valuation experts. Both opposing experts initially valued the subject S corp on a C corp equivalent basis. The Van Vleet Model was used to adjust the C corp value to reflect the ‘economic benefits’ associated with an S corp.

Both experts initially concluded a SEAM of 1.14 (14% equity adjustment). However, one of the experts adjusted the SEAM downward by 50% to a 7% equity adjustment (SEAM of 1.07). This subjective adjustment was made to reflect the assumed risk that the subject company could become a C corp in the future. But the district court was not convinced that this adjustment was appropriate and used this treatment as further evidence of the ‘downward bias’ of the expert.

The SEAM is a mathematical formula that is primarily based on federal and state tax rates. I generally recommend against making subjective adjustments to the calculated SEAM absent significant empirical support data. In Ryan, it appears the court found that the subjective adjustment to the SEAM was not appropriate.”

The case is Wayne L. Ryan Revocable Trust v. Ryan, Nebraska Supreme Court, 308 Neb. 851.

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Joe Thompson Analyzes GameStop Saga in Article for Business Valuation Update

In an article published in Business Valuation Update, Joseph Thompson, CFA, ASA explores the financial underpinnings of one of the most remarkable Wall Street stories in recent memory. “What Business Appraisers Can Learn from the GameStop Saga” offers technical analysis and practical takeaways from the stock pricing scandal that pitted hedge funds against retail investors and dominated headlines for weeks. Click here to read the article in full.

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Authors

David G. Clarke, ASA
Managing Principal

Daniel R. Van Vleet, ASA
Managing Principal

William Jeffers, CFA
Principal

Joseph W. Thompson, CFA, ASA
Principal