An article in the Spring 2019 issue of Family Lawyer magazine shows how a lawyer can attack a valuation expert’s use of the guideline company transactions method for a small- to medium-size firm. The author, Jim Hitchner (Financial Valuation Advisors), provides lawyers with several lines of questioning designed to discredit the expert on cross-examination. Of course, these questions can help experts prepare for such an attack. Here is one line of questioning:
Q: The transactions you relied upon do not have anywhere near the sufficient amount of detailed information to support a value, right?
A: It’s the best we have.
Q: You said in your report that you put less reliance on the transactions method of valuation because it was more unreliable than the other methods you used, correct?
Q: You said it was more unreliable because you didn’t have a lot of information about the transactions, right?
Q: Did you also state that you used it as a corroborating method, not a primary method?
Q: OK, is it fair to say, then, that you placed some reliance on a method you deemed unreliable?
A: I already answered your question.
Ouch! The lawyer discredited the expert with surgical precision. You can learn more on this topic at next week’s AAML/BVR National Divorce Conference in Las Vegas May 8-10. The Family Lawyer issue has some articles written by other speakers that are of interest to valuation experts, including one on financial experts and mediation (Lisa Ann Sharpe, Lasher Holzapfel Sperry & Ebberson) and one on key takeaways from the Tax Cuts and Jobs Act and alimony (Michelle Gallagher, Adamy Valuation). BVWire will be at the conference next week—we hope to see you there! If you can’t be there in person, BVR will do a live webcast.
Extra: Just in time to coincide with the divorce conference, BVR has just released the Business Valuation in Divorce Case Law Compendium, 4th edition, which contains the most important legal issues confronting business valuation experts in divorce cases.
Please let us know
if you have any comments about this article or enhancements you would like to see.