A business valuation expert may be necessary when there is a transfer of ownership interests. For example, when an outsider wishes to purchase a percentage interest in a non-public business or if an owner wants to transfer a percentage of the business to family members.
Additionally, it may be necessary to perform a business valuation when there is a legal dispute over the value of the business or business interest.
Such business valuations should be performed by an experienced business valuation expert who is familiar with accepted valuation methodologies.
How Does an Expert Witness Help with Business Valuation?
A business valuation expert can also help in litigation by providing an independent business valuation using rigorous methodologies, the appropriate data, and accepted principles.
This expert’s conclusions are often refuted by a business valuation expert of the opposing side, thus the business valuation expert witness should be prepared to defend their conclusions and calculations.
A business valuation expert witness can, among other things, be crucial in:
- Assisting in the discovery process to obtain the right information.
- Opposing the other side’s expert witnesses.
- Researching business facts and strategies.
- Providing an expert report and testimony.
Assisting in Discovery
It is critical to bring in a business valuation expert early because that expert can be very helpful in the discovery process of litigation.
Since that expert will determine the value of the business before and after the alleged wrongdoing, that expert will know specifically what data to request from the defendant in order to accurately calculate damages.
For example, in the case of a breach of contract in a merger or a business divorce, the expert will require both historic performance and potential forecast data from defendants that would be requested during the discovery process.
Opposing Other Expert Witnesses
An expert witness can help break down all the opposing experts’ assumptions used to reach their conclusions and determine if they are realistic and conform with economic data. This is normally done through rebuttal reports which allow one expert to opine on the conclusions of another expert in federal and most state courts.
Additionally, based on the conclusions of their own expert witness, counsel may submit a motion in limine to exclude the opposing expert based on the Daubert standard otherwise known as a Daubert motion.
Such an exclusion, if successful, may leave the opposing side with no expert witness to calculate damages which would be a serious if not critical blow to their case or even result in dismissal or summary verdict.
Researching Business Facts and Strategy
By performing independent research and analysis, a business valuation expert witness can break down and opine on the assumptions used by the opposing expert to reach their damages conclusions.
For example, revenue growth and profitability built into that expert’s valuation may not be consistent with the business’s history or industry trends. Breaking down these assumptions can lead to a more accurate and reasonable valuation that will be accepted in litigation.
A business valuation expert witness can perform an independent valuation along with an analysis of the factors and assumptions underlying the valuation and a sanity test of whether these assumptions are reasonable.
Providing Expert Testimony
An expert witness will typically submit a report detailing how the valuation was performed, data sources, and the expert’s conclusions. That expert will need to be able to clearly communicate their conclusions during their testimony to a non-technical audience (triers-of-fact) in court.
Dr. May of DMA Economics has vast experience communicating complex concepts to a non-technical audience with years of testimony in state and federal court and as a professor at the MIT Sloan School of Management and Loyola University of Chicago.
Business Valuation Services
DMA Economics provides business valuation expertise for valuations in litigation and non-litigation contexts.
Dr. Donald May Phd, CPA, managing partner of DMA Economics, has vast experience performing valuations in litigation but has also performed valuations of over 200 closely held businesses and interests in those across numerous industries for financial reporting and estate planning.
How DMA Economics Can Help with Business Valuation
Business valuation should not be a do-it-yourself project but should be performed by an expert who is independent and has the requisite training and experience.
With decades of experience in economics and accounting, Dr. Donald May has the skills and knowledge necessary to provide you with a rigorous analysis of damages that are clearly communicated to all triers-of-fact.
DMA Economics is a leader in providing business valuations using rigorous analyses that are clearly communicated to triers-of-fact. Contact us today using the form on this page for more information on how we can help you from discovery to the close of case.
