In a North Carolina divorce case, the wife’s stake in a dental practice was valued based on what she paid for it two years before she and her husband separated in 2015 (the valuation date). She had purchased a 50% share of a father-son practice from the father, who continued to work at the practice and was paid as an associate. She paid $1.2 million, which was based on an appraisal that included $1 million of goodwill. At the date of separation, she was still carrying the $1 million of goodwill on the books. The elder dentist was still working at the practice, which had a long history and excellent reputation in the community.

No experts retained: At trial, neither the husband nor wife offered up a current valuation of the practice, so the court examined the price paid for the wife’s stake two years before, concluding that it was an arm’s-length transaction. The court also investigated what happened to the practice in those intervening two years. It noted that the balance sheet still carried the $1 million of goodwill and that the elder dentist who had sold out was still working at the practice. “Persons looking at the practice would not see any change that might impact the goodwill,” the court wrote. Therefore, the court valued the business at essentially what was on the balance sheet (the $1.2 million purchase price less some small accounting adjustments).

The wife appealed, but the appellate court affirmed the trial court’s decision, noting that, although the valuation approach was “rudimentary,” it was “sufficiently reliable” considering both parties chose not to retain experts to prove otherwise.

The case is Logue v. Logue, 2022-NCCOA-625; 2022 N.C. App. LEXIS 644; 2022 WL 4350119, and a case analysis and full opinion can be found on the BVLaw platform.