Sometimes, the valuation analyst can establish reasonable compensation. Other times, you need to call in a compensation consultant.
First question: The first issue to look at is the potential impact of a compensation adjustment. “You need to determine if an adjustment will have a material impact on the value conclusion or the outcome of the particular matter,” says Mark Higgins, president of Higgins, Marcus & Lovett, a business valuation and litigation consulting firm based in Los Angeles. He points out that an adjustment will have a different impact depending on the size of the subject company and the magnitude of the potential adjustment.
Once the above issue—and others—are addressed, the decision to bring in a compensation expert will depend on the level of review and analysis that will be required. Higgins lays out the thought process he uses in deciding when to call in extra help in an article in the February issue of Business Valuation Update.
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