A Minnesota divorce case is an example of why judges can get the perception that valuation experts are hired guns. The wife’s expert valued the husband’s interest in an asset management company at $5,067,804, while the husband’s expert came up with $138,418. True, there can be legitimate reasons why two valuation experts come up with widely disparate values for the same entity, so there can be some middle ground. But, in this case, a district court gave the husband’s expert’s opinion “little evidentiary weight” and an appellate court affirmed the decision.

Way off: Among other disparities, the husband’s expert based the valuation on only one year—a year in which no performance fees were paid. The valuation ignored over $14 million in performance fees that were paid over the prior four years. Also, a 2% profit margin was used to compute income that was one-tenth of the operating income from the prior four years. It also did not account for why the husband’s dividend in the year of separation “was more than nine times greater than what he proposed the company was worth.” The husband also argued that he had personal goodwill, but he did not provide any indication of its value.

The case is Tennebaum v. Deshpande, 2023 Minn. App. Unpub. LEXIS 630, and a case analysis and full court opinion are on the BVLaw platform.