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mote, potential purchasers would not ascribe value to the company based on future earnings capacity. In
these circumstances, the liquidation of the assets would yield the highest purchase price, and a liquida-
tion premise of value, as opposed to a going concern premise of value, should be employed. fn 20

If, on the other hand, a company is currently generating adequate cash flow, or the likelihood of the
company generating adequate cash flow in the future is sufficiently high, potential purchasers would as-
cribe value to the company’s assets based on earnings capacity. In such situations, the deployment of the
company’s assets to generate cash flow would yield the highest purchase price. As a result, value esti-
mates based on income or market approaches fn 21 would yield value estimates higher than value esti-
mates based on a liquidation of the company’s assets. Accordingly, a going concern premise would ap-
ply in these circumstances.

Going concern value is defined in the International Glossary of Business Valuation Terms fn 22 as "the
value of a business enterprise that is expected to continue to operate into the future. The intangible ele-
ments of Going Concern Value result from factors such as having a trained work force, an operational
plant, and the necessary licenses, systems, and procedures in place."

As the definition implies, the value of certain tangible assets (such as a manufacturing facility) may be
enhanced if a business enterprise is operating as a going concern. However, going concern value is
largely intangible in nature. Nevertheless, certain intangible assets may retain value even if the company
is experiencing extreme financial distress. In some instances, patents, trademarks, copyrights, brand
names, and customer lists may retain some value even after a business has ceased operations. However,
any such retained value would represent liquidation value as opposed to going concern value.

In the context of solvency studies, the courts have frequently described a debtor as being on its "death-
bed" or as being "dead on its feet" to characterize the condition of a business enterprise that possesses no
going concern value. In other words, courts typically require the application of a going concern value
unless evidence suggests that a liquidation in bankruptcy is likely to occur. fn 23 fn 24 The determination

fn 20 Such a determination of liquidation value would be made either as a mass assemblage of assets, asset groupings, or on a piece-
meal basis. Consideration would also need to be given to whether the liquidation would occur on an orderly or forced basis or some
combination of the two. In such circumstances, a liquidation premise of value should be employed.

fn 21 The asset-based approach can be used to assess the going concern value of a business. As a practical matter, however, it is the
income and market approaches that are generally relied upon to develop a going concern value estimate.

fn 22 The International Glossary of Business Valuation Terms has been adopted by the AICPA, the American Society of Appraisers,
the Canadian Institute of Chartered Business Valuators, the National Association of Certified Valuation Analysts, and the Institute of
Business Appraisers.

fn 23 For instance, see In re American Classic Voyages Co., 2007 WL 1237828 at *6: "If liquidation in bankruptcy wasn’t clearly im-
minent on the transfer date, then the entity should be valued as a going concern."; see also *7 n.12: "[c]ompany was going concern
even though several significant assets remained under construction and company had hired bankruptcy counsel to provide restructur-
ing advice."

fn 24 As observed by the court in Berquist v. Anderson-Greenwood Aviation Corp. (In re Bellanca Aircraft Corp.), 56 B.R. 339 (Bankr.
D. Minn. 1985) aff'd in part and rev'd in part on other grounds, 850 F.2d 1275 (8th Cir. 1988): "Unlike the traditional market value
approach, however, going concern valuation incorporates more than a summation of market values attributable to an entity's various
assets. It indicates the market value of an ongoing business as a whole and thereby includes an additional element of value that attach-
es to property, considered in the aggregate, by reason of the property having been assembled for the conduct of the business and the
property's fitness for such use. This additional increment of value reflects in part, not only the business' earning power, but the ready

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