“There are several critical steps in applying the market approach that will lead to unreliable results if they are not performed properly,” says the ABA in a new article specifically geared to new litigators: A Primer on the Market Approach to Business Valuation. To assess the use of “real transactions and stock prices,” a young lawyer should pay close attention to the expert’s:

• Selection of comparable companies;
• Adjustment of the comparables’ financial statements;
• Selection and calculation of multiples; and
• Support from other valuation approaches.

Oh, it’s good to start them young. “It is critical that the approach and underlying assumptions in a damages claim are consistent with the facts and circumstances in the case,” the ABA advises its fledgling attorneys. “A market approach may be the most appropriate way to quantify damages; however, the opinion of the expert can be subject to exclusion under a Daubert challenge if not applied correctly and appropriately supported.”