The Cornerstone Report finds that despite concerns over “the subjectivity of DCF models,” the methodology remains the primary tool for valuing targets in a Delaware appraisal. Petitioners continue to “overwhelmingly” rely on DCF analyses (94% of the cases) while occasionally also providing a comparables analysis (35% of the cases). Respondents continue to rely on DCF analyses “in the vast majority of the cases” but also have relied on merger price, in part or entirely, approximately one-third of the time. Delaware courts have continued to focus on DCF analysis, utilizing it in 59% of the opinions issued between 2006 and 2018.  No recent opinion relied on a comparables analysis. Accordingly, while concerns over objectivity persist, the DCF continues to be the primary tool employed by litigants and the courts to determine the fair value of corporations in appraisal cases.

We discussed the Cornerstone Report’s data on appraisal activity before, as well as the Report’s data on award premium when compared to deal price.