Partnership Separations

Avoid Costly Mistakes in Business Valuations for Divorce

The Disappointed Client Story.

We received a call to our office from a lady seeking an independent business valuation for divorce purposes. She was not satisfied with the Court ruling on the separation which had been based upon a business valuation report already provided.

The original report was sourced by the legal offices representing both sides. The solicitors had found persons prepared to quote, the cheapest of the three quotes provided was agreed upon; the resultant report was subsequently submitted to the Court for its use.

It turned out the author of that business valuation had not really fully investigated the business, but rather had solely relied upon the financial information provided.

It was too late to change the court’s mind, there was little chance of engaging a new business valuer and getting an alternative report without a lot more expense in legal costs.

The Lesson:

If a business valuer relies primarily on business financial information and undertakes the work from the comfort of an armchair, it may well be to your disadvantage.

The Real World.

Far too often, those not familiar with the business sales market provide business valuations which do not remotely reflect the real world.

Business valuations are time-consuming and demanding if they are to fully investigate the business concerned.

The extent of the information and documentation available is a ‘must know’ before a realistic quote for the work can be done.

Organisations who provide quotes without knowing the extent of the information and documentation available must, by their very nature, be basing their fee on a price guaranteed to win work.

Low-price quotes provide for business valuations that include limitations. You cannot assume that the work will be comprehensive or include work that should be undertaken.

Comprehensive Business Valuation Reports

There are four major components that a business valuation report must address in our view. These are:

  1. An investigation into the physical nature and environment of the business;
  2. An Investigation into the financial records and performance;
  3. An investigation into the business sales marketplace; and
  4. Selecting and applying a valuation approach and method to the results of those investigations.

Don’t be disappointed.

Family Law disputes invariably lead to hurt, financial distress and lop-sided outcomes – Choose your Business Valuer carefully before you make a costly mistake.