FTI experts review the sources of disputes in private equity valuations

BVWire–UKIssue #39-1
June 21, 2022

There are dozens of reasons for legal disputes in every private equity transaction—and business valuation is often at the centre, argue Karthik Balisagar, Lun Yaoguo, and Ishani Vora, FTI Consulting.

Writing for the Global Arbitration Review (and republished by Lexology), the experts offer particular focus on disputes resulting from disagreements over bases of value, hindsight, and valuation approaches.

They highlight three important High Court decisions:

  1. Byers & Ors v Samba Financial Group [2021] EWHC 60 (Ch);
  2. In the matter of Nord Anglia Education, Inc, Cause No. FSD 235 of 2017 (IKJ); and
  3. Wright v Rowland & Anor [2017] EWHC 2478 (Comm).

After considering pre- and post-closing disputes of all types, the authors pay particular attention to cases where financial experts (accountants, valuers, and investment managers) have been implicated—particularly because of the use of hindsight or incorrect assumptions about the basis of value. The Byers case is particularly valuable here, the authors argue.

The selection of discounts and the weighting of valuation approaches (see the Nord Anglia Education case) are two other common sources of disputes.

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