Appraisal Takeaways From AOL

By Scott Barshay, Matthew Abbott, Ross Fieldston and Justin Hamill (March 8, 2018, 12:32 PM EST) -- Recently in In re Appraisal of AOL Inc., the Delaware Court of Chancery, in an opinion by Vice Chancellor Sam Glasscock, relied solely on its own discounted cash flow, or DCF, analysis to appraise the fair value of AOL Inc. below the deal price paid in its acquisition by Verizon Communications Inc. While reiterating that deal price is the best evidence of fair value and must be taken into account when appraising "Dell‑compliant" transactions (i.e., those where "(i) information was sufficiently disseminated to potential bidders, so that (ii) an informed sale could take place, (iii) without undue impediments imposed by the deal structure itself"), the court held this was not such a transaction. The court found that certain of the deal protections, combined with informational disparities between potential bidders and certain actions of the parties, were preclusive to other bidders, and therefore, the court assigned no weight to deal price in its fair value determination. Applying its own DCF analysis, the court ultimately determined fair value to be approximately 3 percent lower than the deal price (possibly due to synergies), thus continuing a string of recent appraisal decisions finding fair value at or below deal price....

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