Discounted cash flow vs. deal price – Chancery Court relies on DCF in appraisal action

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Abstract: When calculating fair value in appraisal actions, Delaware courts have demonstrated a strong preference for objective, market-based metrics. However, this article summarizes a recent ruling that departs from this trend and, instead, relies on a discounted cash flow (DCF) analysis. However, this case is exceptional; a sidebar highlights a more typical appraisal action in which the court chose the deal price in an arm’s-length transaction as a reliable measure of value. Manichaean Capital, LLC v. SourceHOV Holdings, Inc., No. 2017-0673 (Del Ch. Ct. Jan. 30, 2020), In re Appraisal of Columbia Pipeline Grp., Inc., No. 12736-VCL (Del Ch. Ct. Aug. 12, 2019)