An article in the Spring 2019 issue of Family Lawyer magazine shows how a lawyer can attack a valuation expert’s use of the guideline company transactions method for a small- to medium-size firm. The author, Jim Hitchner (Financial Valuation Advisors), provides lawyers with several lines of questioning designed to discredit the expert on cross-examination. Of course, these questions can help experts prepare for such an attack. Here is one line of questioning:
Q: The transactions you relied upon do not have anywhere near the sufficient amount of detailed information to support a value, right?
A: It’s the best we have.
Q: You said in your report that you put less reliance on the transactions method of valuation because it was more unreliable than the other methods you used, correct?
Q: You said it was more unreliable because you didn’t have a lot of information about the transactions, right?
Q: Did you also state that you used it as a corroborating method, not a primary method?
Q: OK, is it fair to say, then, that you placed some reliance on a method you deemed unreliable?
A: I already answered your question.
Ouch! The lawyer discredited the expert with surgical precision.
Extra: BVR has just released the Business Valuation in Divorce Case Law Compendium, 4th edition, which contains the most important legal issues confronting business valuation experts in divorce cases.