April 23, 2020 Articles

Business Valuation 301 for Litigators

Practical guidance for understanding, measuring, and critiquing valuation issues that commonly occur in litigation.

By Marc Asbra
The review and critique of the expert’s valuation report covers three broad categories: math, logic, and perception.

The review and critique of the expert’s valuation report covers three broad categories: math, logic, and perception.

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This article is the last of a three-part series that provides practical guidance for understanding, measuring, and critiquing valuation issues that commonly occur in litigation.

The first article, “Business Valuation 101 for Litigators,” described the conceptual tenets of the valuation process and highlighted two concepts: (1) the market and income approaches both rely on some form of multiple when estimating the value of an operating business; and (2) the “right” multiple becomes evident only after the expert analyzes those items that have the greatest impact on a company’s ability to generate earnings (or cash flow) in the future, as well as the degree of risk in achieving those future amounts.

The second article, “Business Valuation 201 for Litigators,” undertook a deeper examination into the analysis performed by a hypothetical expert to support his critical valuation assumptions, which culminated in his determination that the “right” multiplier for Shoe Co. is 9.0x.

This final article will discuss the most critical areas of focus when reviewing and critiquing the expert’s valuation report. 

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