Companies and buyout shops facing appraisal actions are noticing a change in how Delaware courts determine fair value, exemplified by a ruling that the fair value of Dell Inc.'s stock at the time of its $25 billion take-private deal was undervalued by about $4 per share.

In May, Chancery Court Vice Chancellor J. Travis Laster wrote in a detailed opinion that there is evidence that a "valuation gap" existed between the transaction price and actual intrinsic price.

Vice Chancellor Laster's decision not to consider deal price in the appraisal case is a change of pace and highlights a push toward re-evaluating the overall appraisal process, noted David Margules, a Ballard Spahr LLP litigation partner based in Delaware.

That trend is expected to continue. Chancellor Andre Bouchard ruled earlier this month that Lone Star underpaid for payday lender DFC Global Corp., based on the average of three figures: his own, one of two provided by Lone Star's expert, and the transaction price.

"One of the interesting things about the Dell decision and the new Bouchard decision, in addition to the conclusion the [discounted cash flow] was reasonable, in both cases, they also concluded that even though the deal price had been negotiated at arm's length by people who did their best job, or at least a reasonable job as fiduciaries, they still didn't find the deal price to be reliable because of general factors in the market," Margules said.

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