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Attorneys who work with skilled Private Investigators should be interested in business valuation since it can be a critical component in litigation cases involving divorce and any form of litigation where a business is involved.
To value a business in litigation requires special knowledge of the appropriate law and experience, which must be considered. This applies to marital assets or a disagreement between business owners concerning the business value, a buyout, or unfair treatment of a minority interest holder. The following are examples of what must be considered:
Divorce Litigation:
In a divorce, a business may be the most valuable asset of the marital estate and is generally the most contested. In Texas for example, the following factors must be considered:
Personal goodwill, which is separate from the goodwill of the business, must be excluded from the community value of the business.
The valuator must value the business assuming the owner can freely compete after the sale.
In addition, the valuator must be up-to-date on separate property issues in the event the business may have a separate property element.
Business Litigation:
Business litigation where the value of a business is being litigated includes the following:
A shareholder derivative suit may involve a situation where minority shareholders have been treated unfairly. Most states have statutes that govern items that are not included in this type of valuation.
When interest holders are in a dispute where one interest holder desires to be bought out of the business. In this case, the value of the business will determine the amount of the buyout.
In a recent case, an interest holder wanted a “buy out” at an exaggerated price. The investigation of the interest holder revealed he had a long record of doing the same thing with every business in which he invested. Normally, investigating the background of the party bringing the suit is not part of a business valuation, but it could be a necessary part in representing your client. Through the information developed by the investigation, the attorney was able to question the opposing individual and his expert in deposition. An investigator can help if you are curious about what motivates the litigant.
Special Skills:
An attorney working with a skilled and knowledgeable private investigator in divorce or business litigation matters should look for a forensic accountant or business valuation expert that possess the following skills:
Investigative skills: The valuator must have the knowledge of how to conduct an investigation. Part of that skill is the ability to trace cash, hidden assets, evaluate the conduct of the party filing the law suit, possess the second sense to identify when things do not appear to be right, and possess the ability to conduct an effective interview.
Knowledge of law: Many valuations conducted with respect to a law suit are governed by state or federal statutes and court cases. The valuator must be current with those laws and court cases and know which apply to the type of valuation.
Court Testimony: Testifying in court is an art that is obtained through experience. The business valuation expert must have knowledge of court cases, which may exclude his testimony. Many times the issues are complex and the expert should have the ability to turn complex issues into simple language the judge or jury can understand. This testimony includes mediation, arbitration, or settlement conferences. The expert must be a teacher using terms his audience will understand and not testify in an arrogant manner. Experience has shown that a $600.00 per hour expert offering his testimony in an arrogant, know-it-all manner does not ingratiate himself with the judge and jury. This type of testimony does not impress federal judges and can result in the expert’s report not being considered in the ruling.
In summary, it is beneficial for an attorney to work with a private investigator who is a consulting expert, who is skilled, knowledgeable, educated, experienced, and trained when it comes to divorce and business valuation matters. It is also beneficial to hire a testifying expert who has been recognized as an expert in the field of divorce and business valuation and possesses the knowledge addressed above.
If you or your client needs a knowledgeable Private Investigator, expert witness, contact Edmond J. Martin Chief, Investigator, at Sage Investigations, LLC. Call 512-659-3179 or email edmartin@sageinvestigations.com and visit our website at www.sageinvestigations.com. Ken Huff, CPA and licensed Private Investigator is associated with Sage. His primary area of practice is forensic accounting services in Divorce, Bankruptcy, Trusts & Estates litigation, and general business ligation. He also provides business valuation services for litigation and tax purposes. In addition Mr. Huff holds certification from the American Institute of Certified Public Accountants, Accredited in Business Valuation and Certified in Financial Forensics.
