In two recent decisions, the Delaware Court of Chancery used a discounted cash flow (DCF) analysis to determine the fair market value of an acquired company. Although both decisions were issued in the context of appraisal actions and not in cases involving fairness opinions, the holdings provide some practical guidance to financial advisors for the preparation of DCF analyses in connection with acquisitions.

Management Projections -

• The court in Gearreald v. Just Care, Inc. confirmed that when management projections are made in the ordinary course of business they will usually be deemed reliable. In contrast, the court noted that management projections are not entitled to the same deference when they are made outside the ordinary course of business. It also remarked that the reliability of management projections may be adversely impacted by management’s motives.

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