Business valuation professionals can play a high-profile and fully disclosed role in litigation, providing comprehensive conclusions about the value of an enterprise and testifying in court as an expert witness.
But a business valuation professional’s role in a case need not always be so public. In fact, in our experience, business valuation experts are often first engaged as consultants to assist counsel as they develop case strategy and work through the initial phases of a dispute. In this scenario, the expert’s role can remain undisclosed under the attorney work product privilege.
HOW UNDISCLOSED EXPERTS CAN HELP
Undisclosed work product of a business valuation expert can help attorneys make early calls and set realistic expectations about the value of a business, and whether they should try to settle or move forward to arbitration or trial.
In a consulting role, a business valuation professional can serve as a resource in discovery, helping attorneys navigate financial terminology, assess the relevance and completeness of financial documents produced voluntarily or in discovery, and advise on additional documents that should be requested. They can also provide attorneys with the appropriate financial jargon to use when requesting these documents, which can help limit discovery delays or objections.
Here are a few of the other ways an undisclosed business valuation expert can aid clients and counsel:
- Assistance with requests for production and interrogatories.
- Affidavit assistance and preparation.
- Development of deposition and trial direct and cross examination questions.
- Assistance during depositions.
- Review of responses to interrogatories.
- Review of responses to requests for production.
- Review of correspondence and non-financial information.
- Calculations of a range of hypothetical values during early case assessment.
- Critique of other expert’s valuation reports.
- Industry research.
CONSIDERING A PHASED VALUATION
Business owners and their counsel may be able to utilize a more limited analysis, known as a “calculation of business value,” to help formulate case strategy or drive settlement negotiations. Or they may require a comprehensive valuation, complete with expert testimony, known as a “conclusion of business value.” While counsel and clients may choose one option over the other, it can be difficult in the early stages of a case to determine if a more in-depth valuation will be needed.
A third option can help solve this dilemma—the phased approach. A phased approach allows counsel and clients to start with an early, undisclosed estimate of a business’s value and escalate to a more comprehensive disclosed analysis should the need arise.
A calculation of business value applies limited valuation methods to a specific set of financial metrics. The result is an estimate or potential range of a business’s value. As we noted, this initial phase is particularly advantageous in the early stages of legal disputes or negotiations, where a preliminary calculation of business value can significantly influence decisions or facilitate settlements.
If a case moves beyond preliminary settlement discussions and heads to trial or arbitration, the phased approach seamlessly transitions to the conclusion of business value. The conclusion of business value offers a more comprehensive and qualitative assessment by the expert that involves a thorough examination of financial performance, market conditions, industry trends, and qualitative aspects unique to the business. At this phase, though, your expert will need to be disclosed in most jurisdictions.
FINAL THOUGHTS
Valuation experts can offer invaluable support to counsel as they craft litigation strategy and navigate the initial phases of a case—all under the cloak of privilege. This gives attorneys and their clients more control over the direction of their disputes and is helpful in managing costs.
And should the need arise, business owners and counsel can escalate a phased approach to a more comprehensive conclusion of business value, disclosure, and expert testimony.
To learn more about the ways we can assist as consulting experts, contact us to schedule a call with one of our experts.