The hiring of a joint business valuation expert can often be useful. This strategy assumes that the parties will openly share information and act in good faith. But it may not be realistic in all situations, including contentious divorces and shareholder disputes.
Sharing fees and information
When using a joint valuation expert, the parties will only be satisfied by the outcome if there’s a mutual perception of fairness. Perceived fairness is enhanced when:
• Both parties have a say in the interviewing and selection of the credentialed expert,
• The expert and both parties have full access to relevant information, such as tax returns, financial statements, responses to questionnaires and notes from site visits,
• The expert’s communications between the parties are shared, and
• Both parties contribute to the expert’s costs.
The expert should explain upfront that the valuation will be performed in an objective, unbiased manner. If either party suspects that a joint valuation expert is biased, dissatisfaction may ensue, possibly leading to appeals and additional fees.
Potential upsides
When the conditions are right, using a joint expert can benefit both sides. The benefits extend beyond just saving money and streamlining the valuation process. A joint expert also helps minimize disruptions to business operations from site visits, information requests and management interviews.
Additionally, parties that share a valuation expert prove that they can trust each other, improving the chances of effectively working together in the future. For example, buyers and sellers who share an expert to conduct M&A due diligence lay the groundwork for transitioning management from the seller to the buyer after the deal closes. Likewise, divorcing spouses who own a business may find it easier to co-parent their children or co-manage a family business after they use a joint expert to help settle their marital estate.
A joint valuation expert also may improve the odds of settling the case by giving the parties the opportunity to discuss issues and discrepancies out of court. But, if they do wind up in court, the parties’ positions may be closer when using one expert who has full access to information, rather than two experts who may be using different data points.
Realistic expectations
There may be times when joint experts won’t work. For instance, if one party to a lawsuit hides information or doesn’t appreciate the value the expert brings to the table. For help evaluating whether a joint expert might work in your particular situation, please feel free to contact our office.
For additional information on this or any other issues related to business valuation, forensic accounting or litigation support please feel free to contact our office at the above phone numbers. You can also email our office at msgcpa@msgcpa.com for immediate assistance.