Absent a goodwill analysis, the court does its own

BVWireIssue #244-2
January 18, 2023

marital dissolution/divorce
goodwill, net asset value, marital asset, direct capitalization of cash flow analysis

In a Tennessee divorce case involving the husband’s plastic surgery practice, neither valuation expert did an analysis that separated enterprise and personal goodwill. The husband’s expert relied mostly (90%) on the adjusted net asset value (NAV) but also considered the capitalized cash flow value (CCF), giving it a 10% weight, arriving at a value of $110,000. The wife’s expert relied 100% on the CCF and came up with a value of $350,000. Both experts acknowledged that their valuations included goodwill, and the husband argued that the personal goodwill component needed to be backed out and excluded from the marital property. The court, finding that the wife’s expert was “more experienced,” adopted her expert’s valuation and backed out $95,000, coming up with $255,000 as the value of the practice. This value included an amount in excess of the NAV representing some level of enterprise goodwill. The husband appealed, but the appellate court affirmed the trial court’s valuation, noting that it adopted a valuation “within the range of the evidence submitted.” In the end, the court did its own “analysis” of enterprise and personal goodwill.

The case is Chase v. Chase, 2022 Tenn. App. LEXIS 478 (Dec. 8, 2022), and a case analysis and full court opinion are available on the BVLaw platform.

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