Best Practices for Using a Valuation Expert

Involving the ideal valuation expert for your case early in the process will help to secure your client’s business assets and financial future.

By Arik Van Zandt, Business Valuator

Your new client has an equity interest in a closely held business that is at stake in their divorce settlement. Whether they are the “in” spouse who runs day-to-day business operations and keeps the company’s documents or the “out” spouse with limited knowledge of the business, bringing the right valuation expert onto your team early in the process is critical in protecting your client’s financial position.

Quickly identify and engage a premier valuation expert before the opposing attorney can retain them. The expert can then hit the ground running and assist in gathering appropriate documents and information. Experts have comprehensive lists of information they request for valuation assignments and can cater those lists to the subject company’s industry. Getting the necessary information to value a company may be compromised if the expert is not immediately involved in the process.

Carefully Develop a Supported Opinion

Allocating sufficient time for the expert to develop a reasoned, supported opinion allows them to conduct thorough research on the company’s industry, comprehensively assess company-provided data, and review relevant testimony prior to issuing the valuation report. Rushed opinions lead to mistakes and oversight.

Insufficient preparation time can also lead to missed deadlines. The expert should do everything possible to ensure the work gets done in a timely manner, but if you engage them after the discovery deadline, their report might be inadmissible. Although some family law courts have been known to admit a late opinion, you should not count on it.

Avoid Discovery Blind Spots

A major concern for many valuation experts is whether the family law attorney has provided them with all available information. There are few things worse than being in a deposition or on the stand when a document is put in front of the expert that they have not seen before. Cherry-picking which information to give your expert in order to save money or obtain a desired result will put the expert’s work, and your client’s case, in jeopardy. Work with the expert closely throughout the engagement, updating them as new discovery becomes available so they can determine whether the information is relevant to the analysis.

The expert can also be used to inventory, index, and manage the document production – which increases the chances that they will be aware of all discovery. Top valuation experts have the tools to handle large quantities of data that they can distill down to a useful index for case-management purposes. For assignments that involve asset tracing, electronic data mining, analysis, and discovery tools can be used to perform financial forensic exercises.

Create Powerful Testimony and Questions

After the reports have been exchanged, work with your valuation expert to develop deposition and cross-examination questions for the opposing expert. Valuation experts understand the impact, sensitivity, and relevance of the assumptions and inputs that go into a valuation assignment, as well as how hard it can be to defend them. Having a comprehensive list of questions to ask in deposition or at trial, with follow-up questions depending on the answers, will create a more detailed record.

An expert can also provide helpful insights at mediation and run real-time scenarios based on new inputs during a negotiation. Finally, when it comes time for trial, use your expert to help develop exhibits that will ultimately assist in presenting the best case.

Arik Van Zandt is a Managing Director at Alvarez & Marsal’s valuation practice. He specializes in the valuation of business and other assets, supporting divorce counsel by providing financial analysis reports, asset tracing, and serving as an expert witness. www.alvarezandmarsal.com

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