In February, a Tennessee appellate court considered a previous ruling in Buckley v. Carlock, 2022, involving the determination of the value of an oppressed minority shareholder’s interest in an “ultra-high-end” car dealership. Adam Lawyer, Partner in FORVIS' Fort Worth, TX office, as an expert witness in the case, suggested that utilizing the “blue-sky method” would be the best method in this situation. “Blue sky” represents the intangible value of a car dealership. A blue-sky multiple is applied to normalized earnings, and then the tangible net assets are added in to get the fair market value of the total equity value of the dealership. The trial court accepted the blue-sky, or current industry market indicator, valuation methodology. The appellate court confirmed the trial court’s judgment.
With this decision, the courts have agreed that the use of a valuation method that is traditionally considered a “rule of thumb” is appropriate in the correct circumstances. The Current Industry Market Indicator, or “blue-sky” method, has been used to value dealership businesses for many years and when correctly applied is extremely useful in estimating the value of an automobile dealership.
The case can be found here.