Litigation/Dispute Articles of Interest

The following are recommended articles that we have published in recent newsletters. Each discusses important issues in valuation.

What To Look for in a Rebuttal Report - Valuators usually prepare standard valuation reports for clients. But they can also prepare rebuttal reports to convey expert opinions in legal matters. Rebuttal reports are a special subset of valuation reports that valuators prepare exclusively for litigation purposes. Typically, they provide either a critique of another expert’s valuation report or a response to the opposition’s criticisms.

Coping with rising Daubert challenges - A reliable expert witness can help explain a case’s technical elements. But an expert who is unqualified or uses unsupported methods provides the court with little relevant information — and may even serve to mislead the judge or jury.

Court rejects expert testimony - In September 2000, Rainforest Cafe Inc., a struggling “eatertainment” operator, entered into a two-part merger with Landry’s Restaurants Inc. At the time of the merger, Rainforest’s stock was trading on NASDAQ for around $2 per share.

Shareholder disputes: Involve a valuator early - Disputing shareholders frequently hold off calling in an expert as they try to rein in mounting professional fees and optimistically hope to settle their differences amicably. But this can lead to unnecessary haste and expense. The proactive use of valuators promotes efficient strategy and, ultimately, saves time and money. Valuators can help in the early stages of a shareholder dispute in several ways.

Third time’s a charm - An additional opinion can help resolve disputes - Suppose two competent experts are hired to value a privately held business. Even if both appraisers are unbiased and equally qualified, and apply sound appraisal practices, they are unlikely to arrive at the same number. In fact, valuation differences of 10% or more are common — even under ideal circumstances.

Watch out for financial misstatement - A valuation is only as accurate as its underlying financial data. Some unscrupulous business owners employ creative accounting techniques to hide assets or lower profits.