Why our valuations are defensible in court

Why our valuations are defensible in court

Nothing on this website is legal advice.

1. We have an anti corruption policy, which no industry colleague to our knowledge currently has. This is something that we recommend others to adopt. Similarly to how the opposing parties usually distrust each others lawyers, as they are biased, the same cannot be claimed when it comes to us, due to our rigid three step anti corruption policy. This increases our credibility in the courtroom.

2. Different choice of valuation method, different valuations. Do you see the problem? Nielsen Valuation group is an authority within the small and niche industry of business valuation in Europe and North America. We don’t produce flawed valuations, that can be disputed easily.

3. The old concept of generalization vs specialization is still very relevant. Expert witness testimony is rarely done by generalists, because they are generalist, and not specialists.

4. The owner, who is actively engaged in the business, is also an author of the book; Small Business Valuation, which is one of two known books that focus specifically on valuation of smaller businesses, which is significantly different from valuation of larger businesses. The other book is written by Lawrence W Tuller in 2008. Small business valuation is more affected by internal factors in the company, while larger companies are more affected by macro economics.

5. Our valuations have been respected to the extent, where large businesses that have reached over the billion dollar mark have chosen to respect our valuation and not go against it. This is despite them having the legal and financial muscles to do so, with a smaller business as the counterpart. In this particular case, five jobs were also saved. We recently had another high profile case in the High Court of Justice (London). This was in regards to a lawsuit concering an international company, where we went up against one the largest corporate finance firms in the UK. This is now public records. Please ask us about it, and we will show you what it looks like, when a seemingly good valuation gets opposed by Nielsen Valution Group in court.

6. We leave no room for the opposing legal representation to claim that we would be biased. This would be rather hard to say about someone that also has an interest to also sell the business. The concept of being unbiased or biased is usually taken very seriously in court, regardless of the jurisdiction and legislation. There are countless examples of biased opinions being disqualified in court, and it stretches beyond expert witness testimony.

7. We always do on-site inspections and interviews, at your business location. Online valuations are rarely ever used in court, because they are too easy for the opposing party´s legal representation to ”shoot down”. If the business valuator doesn’t spend the effort to visit your business location, then it qualifies as an online valuation.

8. We require payment upfront, meaning that our clients cannot use the payment as leverage. We do lots of valuations, and every so often, we get asked if we can reach a certain number. The standard answer is that we dont know, until we have executed the valuation, and since you have to pay upfront, chances are you will not be satisfied if you have requested or “ordered a specific number”. This is more or less the definition of corruption.

9. We do not base any valuation on anything that can be claimed to be hearsay. This would leave room for the opposing legal representation to dispute it. The market valuation method is especially difficult to use in American and British courts, as it is often, but not always based on hearsay without proper documentation of the previous transactions. This limits, but not excludes, the applicable use of it alone, without also employing other valuations methods. One can only speculate that the courts often share our opinion of how a valuation is not reliable and trustworthy unless it combines the perspective of different valuation methods, and disallows the opportunity to cherry pick the valuation method to the benefit of a single party.

10. Even if the valuation is not to be used in court, executing a business valuation is probably pointless if the valuation and the organization behind the valuation is not respected and acknowledged by your counterpart.

Business valuation is the process of determining the most likely value of the business, in a transaction, where both parties are equally motivated to transact. A qualified valuation of a business should be according to the concept of intrinsic value and include an unbiased normalization of the financial statements. The final calculation of a business appraisal is fairly simple and quick, which is typically what you only get, when ordering an online valuation, without an on-site visit. The process of normalizing the financial statements along with weighing in the different valuation methods against each other, is what requires the most amount of time and competence, by the business valuator. The normalization of the financial statements is typically what affects the valuation the most. A company valuation should only be considered as reliable when it is properly independent and unbiased.

The most common methods for valuing a company are; the market approach, the income approach and the asset approach. They all have their strengths and weaknesses, and their own subcategories. No valuation method is complete enough, to solely be used to value a company.

The market approach doesn’t properly weigh in the profitability or assets of the company, which arguably are the most central aspects when valuing a business. Therefore, most valuations according to the market approach, are not of intrinsic value.

The income approach doesn’t take the assets that the company owns, into account. Therefore, companies with lots of assets get deceptive valuations.

The asset approach doesn’t take the profitability into account. Therefore, profitable businesses get deceptive valuations.

Want to go with a cheaper option or even do the valuation yourself?
Nothing is stopping you, but...

You may lose the lawsuit, due to the valuation failing to be waterproof.

You may never settle the conflict, hurting the relationship with your counterpart.

You may get deceived while entering or exiting your partnership.

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