17 / November 2009

How to work with your financial experts...and win

Posted in: Business Valuation Law News Written by: admin
Categories: expert testimony valuation experts
Tags: best practices

 
“I want someone who will present well in court, obviously,” said Allen Mayefsky (Sharesky Aronson Mayefsky & Sloan LLP, New York City). “But most financial experts do the same thing in report after report. I want someone who can apply the concepts in a legitimate and justifiable way—but that also may be out of the box.”
“I want value added,” agreed Mark Sobel (Greenbaum Rowe Smith & Davis LLP, New Jersey).  “I want someone who’s going to get me to think about things I might not otherwise—like different methodologies, things that are wrong with the other expert’s report. I want to be educated on all the things I might miss, and I want it explained in as imaginative a way as possible.”
“I’ll use consulting experts who are incredibly creative and smart and good analysts,” said Don Schiller (Schiller Ducanto and Fleck, Chicago). For testifying experts, he looks for “someone who can take complex topics and spoon feed them in a convincing way.”

“I want experts who are very proficient in e-technology,” added Stephen Kolodny (Kolodny & Anteau, Beverly Hills). “A picture is worth a thousand words,” so an expert’s use of graphics and exhibits is critical to “telling the story” of the valuation at trial.

Do lawyers always use the same experts? “I tend to stick to the same experts because they have a lot of credibility—great traction with the judges,” Kolodny said. Likewise, Mayefsky draws from the same list of experts, “because bottom line, they are good.”  Most of these experts have testified on both sides—for the plaintiffs and the defendants—and their integrity is sound. “If I can get you to shave your report you won’t work for me,” Kolodny said, “because that means you’ll shave it for someone else.”

Schiller keeps two different lists, one to handle standard matters and another for clients[AN1] <#_msocom_1>   in the “upper-bracket” (above $20 million in assets). In the upper-bracket, he prefers to use experts who are “tops[AN2] <#_msocom_2>   in their field.” The litigators agreed that special issues or industries in the case (e.g., hedge fund values, IP or IT) necessitate an analyst with the “embedded” expertise. Schiller will often enlist his consulting expert to find the top industry specialist and educate both the lawyer and appraiser on the unique issues of the industry. “[Such education] is invaluable,” he said. Mayefsky agreed: “When you have an unfamiliar or complicated industry, getting together a team approach is critical.”

“All this is great, but we live in the real world with clients paying real bills,” Sobel pointed out.  Practicalities may prohibit or limit the availability of multiple experts on a given case. It may be terrific to have an expert who knows the particular industry, “but you’ve also got to have the expert who knows business valuation.” All else being equal, the expert who knows both the business and the industry will be the most persuasive, Schiller added. If you don’t know the industry, spend some time learning it—seek out trade associations, industry reports, and similar sources. At the same time, identify and prepare for questions regarding the “soft” or more vulnerable points of your BV analysis: revenues, expenses, earnings, and discount (or capitalization) rates; comparable or guideline companies; marketability and liquidity discounts; and minority discounts.

Lawyers we just interviewed stress credibility first and foremost, but they also highlight creativity, communication skills, and commitment. Good work is not enough. An expert’s superior analytical skills and ability to produce quality reports is a given. Yet, these days, being intelligent, experienced, and available won’t get you in the door. To impress the more sophisticated litigators in divorce, tax, and business disputes, you’ll want to make them sit up and say, “I never would have thought of that.”

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