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Jointly appointed expert witness - how do you get it right?

It is an old adage but a good one: valuing a private company is an ‘art and not a science’. Given the same set of figures, it is very possible that all 19 Mercer & Hole partners would provide a slightly different valuation. 

My tips for preparing a valuation, which should be accepted by both parties in a jointly appointed expert witness case, are:

  • Use your experience of the SME market – It is no use trying to directly apply stock exchange multiples to private companies. Recent business sales in the local market should be used as a benchmark, to compare against discounted FTSE multiples.
  • Use sector knowledge – it is useful to talk to my partners that have particular sector expertise (for example in construction, logistics, retail etc). This way you can identify the trends, valuation bases, recent transactions and other pertinent matters that will affect your opinion.
  • Utilise the different disciplines within the practice – I often talk to my colleagues in our tax, transaction services and insolvency departments. Drawing on their experience adds a different dimension to the report.
  • Apply several different valuation bases – consider earnings, net asset, dividend, discounted cash flow and any other relevant methodologies. This way a balanced opinion is given.
  • Make the valuation understandable to others. It is good to avoid lengthy reports, but it is very helpful if both parties in the dispute can understand how the figures are arrived at. If one party feels the valuation is difficult to understand, it is more likely to lead to a prolonged and unnecessary dispute.

The production of an objective valuation which is accepted by both parties ‘first time round’ is our goal. This saves the time and money spent on protracted disputes over the valuation.

 

 

Date: 25th March, 2009
Author: Mike Joy

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