‘Let’s kill all the valuators’

Henry VI, Part 2, is hardly one of Shakespeare’s most famous plays, but it may contain one of the bard’s more famous lines, uttered by Dick the Butcher to an anarchist assemblage: “First thing we do, let’s kill all the lawyers.…” Flash forward three thousand (or so) years, and an assemblage of BV professionals on LinkedIn is still discussing the recent article on the future of valuation litigation. Written by two top-tier attorneys, the article (which we first introduced here, with a follow-up here) serves as a “cautionary tale” for appraisers, says Richard Conn, who initiated the new LinkedIn discussion (membership required). “Here we have Shakespeare’s ‘Dick the Lawyer’ saying, ‘Let’s kill all the Business Valuators.’”

What is of a continuous surprise to me is that honest, reasonable experts can have such diverging opinions of value and almost always, coincidentally, directionally in accordance with the bias of their clients. If absolute objectivity is the modus operandi of the valuation profession then there still will be cases [in which] opposing experts materially disagree upon the valuation of an asset. Indeed, this is exactly why the court resolution process exists.

But statistically speaking, [such cases] should be in the minority. So, from this vantage point I have a great deal of sympathy towards [the attorneys’] position of, “if the valuation profession only serves to throw dust in the court’s eyes and make the ultimate resolution all that much harder—why bother engaging them?” Responds R. Christopher Rosenthal: “In the vast majority of valuation litigation matters we testify in, the availability of public market data is limited if [not] nonexistent. To the extent that relevant market data does exist, our work is focused on that data and how to interpret and arrive at a conclusion of value for the subject company. Based on my experience, it would be challenging in many cases for the finder of fact to arrive at an opinion of value without valuation expert testimony.”

The article’s premise is “naively simplistic,” Conn agrees, yet the authors’ message is clear: “Valuation experts are not providing assistance to the court (as is their duty); are primarily acting as advocates for their clients; and should be engaged only in those cases where non-expert evidence is insufficient.”