OT30309 - Capital Gains

Valuation of Oil Assets (including shares). Principles of Valuation. The Special Purchaser.

Sometimes the valuation of an asset may be complicated by the presence in the market of a special purchaser. Such a person may, for his or her own reasons, be prepared to pay a sum in excess of the normal market value of the asset.

In Estate Duty cases, principally CIR v Crossman [1937] AC26, it has been held that you may need to take account of the existence of a special purchaser in valuing the asset but that the price which the special purchaser would be prepared to pay may not be the market value.

The price which a special purchaser would be prepared to pay is, by definition, an abnormal price, which exceeds market value because of the particular circumstances of the special purchaser. But the existence of the special purchaser in the market might be expected to drive up the market value which a hypothetical purchaser would be prepared to pay.