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Who should value?

There are, in fact, three different bases upon which a specialist valuer would generally operate in divorce cases:

  • As a party expert. The valuer would be appointed by only one spouse in order to present that spouse’s case and the husband or wife would be responsible for the fees.
  • As a single joint expert.This is a single expert witness appointed jointly by the parties (or by the Court) rather than each appointing separate valuers and the fees are generally shared between the parties. Whilst the single joint expert should generally not be the business’ accountant, it may be that the expert will rely quite heavily on the accountant, who has detailed knowledge of the business.
  • As a shadow expert.This is someone who is appointed, often in more substantial cases, to take a partisan view and, for example, to point out where the joint expert’s report is wrong. This can be quite divisive and undermine the joint expert but can be important when large sums are involved.

The quantum relative to the difference that a correct and proper valuation can make is probably best illustrated by the practical example of one couple who, after fifteen years of marriage, disputed the value of the successful restaurant business which the husband had run for thirty-three years:

The wife sought 50% of the net assets of the marriage plus school fees and the husband offered 42%. Both spouses had expert witnesses and the main difference was in their view of the value of the business. One expert valued it at 6 x earnings whereas the other valued it a 9 x earnings.

The Judge relied on evidence of similar transactions and ruled that 6.5 x earnings should be applied. He commented that the opinions of experts were often a ‘doubtful utility’ because they are the opinion of experts and experts’ opinions differ! There were not adequate resources for a clean break so the Judge ordered that the wife should receive £1.45 million plus £60,000 per annum, with child maintenance of £20,000 a year and the school fees paid by the husband.

This practical example shows how differently even two experts can value the same business with one putting a 50% premium over the other, and with the Judge erring 83% towards the lower multiple. More than anything, this argues for a practical and fair approach by the parties to the divorce and by the appointed valuers.

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