Page 104 - M & A Disputes

Investment risk. The degree of uncertainty as to the realization of expected returns. (Practitioner
— Appendix B)

Investment value. The value to a particular investor based on individual investment requirements
and expectations. (NOTE: in Canada, the term used is "value to the owner.") (Practitioner —
Appendix B)

Key person discount. An amount or percentage deducted from the value of an ownership interest to
reflect the reduction in value resulting from the actual or potential loss of a key person in a busi-
ness enterprise. (Practitioner — Appendix B)

Lattice models. Stock Option pricing models involving the use of lattices or calculations with
"steps" to enable the calculation of a range of values given varying time frames for the exercise
of the options. Research has shown that 1,000 time steps are usually needed to provide a good
approximation of value. Computer generated lattices are generally used in these models. fn 9

Limited appraisal. The act or process of determining the value of a business, business ownership
interest, security, or intangible asset with limitations in analyses, procedures, or scope. (Practi-
tioner — Appendix B)

Liquidation value. The net amount that would be realized if the business is terminated and the as-
sets are sold piecemeal. Liquidation can be either "orderly" or "forced." (Practitioner — Ap-
pendix B)

Liquidity. The ability to quickly convert property to cash or pay a liability. (Practitioner — Ap-
pendix B)

Loss. 1. An undesirable outcome of a risk; the disappearance or diminution of value, usu. in an un-
expected or relatively unpredictable way. 2. Tax. The excess of a property’s adjusted value over
the amount realized from its sale or other disposition. IRC (26 USCA) § 1001. 3. Insurance. The
amount of financial detriment caused by an insured person’s death or an insured property’s dam-
age, for which the insurer becomes liable. 4. The failure to maintain possession of a thing. (BLD)

Actual loss. A loss resulting from the real and substantial destruction of insured property.
(BLD)

Capital loss. The loss realized upon selling or exchanging a capital asset. Cf. capital gain
under GAIN (3). (BLD)

Casualty loss. For tax purposes, the total or partial destruction of an asset resulting from an
unexpected or unusual event, such as an automobile accident or a tornado. (BLD)

Consequential loss. A loss arising from the results of damage rather than from the damage it-
self. A consequential loss is proximate when the natural and probable effect of the
wrongful conduct, under the circumstances, is to set in operation the intervening cause

fn 9 See footnote 4.

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