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 increases our credibility in court.

2. Different choice of valuation method, different valuations. Do you see the problem? We combine several valuation methods that even out the differences that otherwise occurs.

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 two books within business valuation.

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.

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”.

9. We do not base any valuation on anything that can be claimed to be hearsay.

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.

The contact form does not work, please email christoffer@nielsenvaluationgroup.com

Christffer Nielsen, cell phone (737) 232-0838