Business valuation is an 'iterative' process, says appraiser

How do you explain valuation to a group of lawyers who are relatively unfamiliar with the discipline?  This was the challenge facing the appraiser Serena Morones (Morones Analytics) recently at a CLE organized by the Multnomah Bar Association (MBA) in Portland, Ore. She showed a diagram with arrows heading one way only to circle around before heading in the other direction. This, she said, is how the process works. It's "iterative," meaning that fact and information gathering often is  an ongoing, even protracted process that forces the appraiser to revisit assumptions and rework conclusions. It's not a question of hitting a point once and then moving on.
The presentation also included two attorneys who, with Morones, talked about what it's like to work successfully with a valuation expert. Both sides come at the damages issue from different angles; then there are the client—the damaged party or the defending party—and, of course, the jury. All parts have to work in harmony to present a compelling picture to jury members. This means preparing the expert for strong deposition and trial testimony. Failure to use language the jury can understand and to see issues from the layperson's perspective, she says, can make the appraiser vulnerable.
She remembered being an expert in a case involving an organic granola-producing company in Portland. She used the market approach and on the stand discussed her comparables, which unexpectedly opened her up to attack on cross-examination. "So you are saying that a company making carob syrup is comparable to one making organic granola?," the opposing attorney asked. "Yes," she said. "No further questions, your Honor." Although the comparison was airtight from an appraiser's perspective, try selling it to a jury in granola-cruncher Portland.
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