Picture a courtroom near the end of a two-week civil jury trial. It is a securities class action, where shareholders in Acme Corp. challenge General Merchandise Inc.’s acquisition of Acme. Acme’s directors are defending the deal that they negotiated with General Merchandise. The key issue in the case is whether the sale price for Acme was fair. The jury has already heard several days of fact and expert testimony, much of which involves complex financial accounting principles and intercompany debt structuring. There is a lot of math.
The defendants’ attorney is nearly finished with a detailed cross-examination of the plaintiff’s key witness, Dr. Jane Smith. Smith is a business valuation expert who presents two complex econometric models: one criticizing the merger deal that the Acme defendants approved, and the second advocating an alternative deal that the plaintiff class believes better represents the “fair” value of Acme and the price she believes that the Acme defendants should have negotiated. The attorneys and the presiding judge are all paying keen attention to every question and every answer; it is clear to them that the balance of the case likely hangs in these exchanges about Smith’s models.