Smarter Business Valuations Are Needed in Business Sale Transactions – Kilgour Case

BRISBANE, Australia - EntSun -- In 2016, three family trusts sold 100% of the shares in Punters Paradise Pty Ltd, an online wagering business, to News Corp for approximately $31 million. The ownership split was:

• Pettett Trust – 60%
• Kilgour Family Trust – 20%
• Reuhl Family Trust – 20%

The sale was negotiated at arm's length, involved extensive due diligence, and included a working-capital adjustment after completion.

The minority beneficiaries (20% holders) sought to apply the small business CGT concessions, which in this case required the seller's net assets to be below $6 million. To fall under this threshold, they argued their 20% minority interests should be heavily discounted in value, on the basis that smaller holdings are typically worth less on a standalone basis.

The ATO disagreed, arguing that each 20% interest formed part of a coordinated 100% sale and should be valued simply as 20% of the final $31 million deal price.

The Court agreed with the ATO.

The Court applied the long-standing "willing buyer/willing seller" principles from Spencer v Commonwealth, but through a more modern, commercial lens. Two key messages emerge:

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Real-world expectations outweigh rigid valuation points
Although the tax rules require assessing value "just before" signing the sale contract, the Court made it clear you can't ignore what was reasonably foreseeable at that time. In this case, the sale was effectively locked in through negotiations, so the agreed price became the strongest indicator of market value.
Key takeaway: If a buyer is clearly willing to pay a premium – for control, synergies, strategic value or growth opportunities, those factors will likely shape the business valuation for tax purposes.

Actual deal terms carry more weight than theoretical discounts
The taxpayers argued for a typical "minority discount". However, the Court focused on the commercial reality:

• All shareholders intended to sell together.
• The buyer wanted the entire business, not individual stakes.
• A coordinated 100% sale generally increases the value of each holding.

As a result, a hypothetical buyer would not insist on a discount. The minority interests effectively benefited from the value of the full sale.

Key takeaway: When shareholders act collectively, the tax valuation of each interest can increase, sometimes significantly.

To learn more about the case, and the implications for valuing your business, visit https://azimuthpartners.com.au/case-study/smarter-business-valuations-are-needed-in-business-sale-transactions/