More thoughts on experts and their value gaps

BVWireIssue #179-3
August 16, 2017

Jim Alerding (Alerding Consulting LLC) agrees with all the reasons Chris Mercer (Mercer Capital) stated on why highly qualified and experienced experts looking at the same company may achieve very different valuations. Alerding adds that there are at least two related areas in which the court itself could make a meaningful difference. They concern access to information and to management. "My personal experience has been that the court often is very dismissive when attorneys complain about the other side’s unwillingness to make data and management available to their expert," Alerding says. Yet, an order from the court to do so could easily resolve this information deficit and result in more balanced valuations. Instead of railing against the experts, the court should use its power to create a more level playing field during the valuation process, he notes.

System’s fault? Experts and judges have also pointed out that the bias against experts in the litigation setting may have a lot to do with the adversarial system, which encourages casting doubt on (aka testing) the integrity of an expert’s work. The Honorable David Laro, and others, has, in fact, proposed a different, more collaborative approach (known as “hot-tubbing”) in which the experts sit with the judge ostensibly to hash out their valuation-related differences and achieve the “correct” value determination. Alerding says his experience has shown that often the experts’ egos get in the way and a settlement of the differences remains elusive. "Now if the judge would say, 'I am going to sit you both down in a locked room together and not let you out until you have an agreed upon resolution,' then you might get some results," Alerding says.

Extra: Alerding and attorney Sylvia Golden, BVR’s legal editor, will conduct a webinar, BVLaw Case Update: A One-Hour Briefing, on September 19.

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