Counsel defending a national retailer retained Cornerstone Research in a fraudulent conveyance action that arose from the sale of assets by one of the retailer’s regional divisions to a competitor.
Counsel defending a national retailer retained Cornerstone Research in a fraudulent conveyance action that arose from the sale of assets by one of the retailer’s regional divisions to a competitor. After suffering a crippling labor strike the competitor filed for bankruptcy, and later filed its suit against the retailer, claiming that the assets’ purchase price exceeded the total value of the retailer’s regional division’s assets by more than $50 million. Defense counsel retained Cornerstone Research to support two expert witnesses who analyzed key assumptions made by plaintiff’s experts and identified both methodological and mechanical errors that were critical to their evaluations.
The court accepted the analysis provided by the defense team.
The defense team demonstrated the plaintiff’s failure to select comparable publicly traded companies and transactions in its valuation of the assets. The retailer’s experts also demonstrated that the plaintiff’s discounted cash flow model understated value by understating margins, failing to consider the tax benefit of amortization, and failing to consider the cash flow benefit of extending accounts payable, among other things. The court accepted the analysis provided by the defense team, stating that the competitor “has failed to carry its burden to prove that the leveraged buyout was a fraudulent conveyance….”
