Third time’s a charm
An additional opinion can help resolve
disputes
Even two unbiased, equally qualified valuation professionals
applying sound appraisal practices are unlikely to arrive at exactly the same
number. In fact, valuation differences of 10% or more are common — even under
ideal circumstances. In litigation, when neither valuator will concede and the
disputing parties won’t split the difference, an objective third expert can
help settle the dispute. This article discusses third expert selection and uses
a hypothetical case to illustrate the important role a third expert can play in
providing an effective alternative to the averaging of two divergent opinions.
Capitalizing vs.
discounting
Which appraisal method is appropriate,
when?
Under the income approach, value is a function of a company’s
expected economic benefits and its risk relative to other investment types. The
two most common methods that fall under the income approach are the
capitalization of earnings and discounted future earnings methods. This article
discusses the distinctions of and differences between the two methods as well
as the possible complexities that may arise in the use of the income approach.
An understanding of these complexities can help attorneys and their clients
achieve more appropriate valuation results.
Buy-sell agreements gone
bad
Plan for the unexpected with a
comprehensive plan
Buy-sell agreements are legal contracts that spell out buyout
terms and provisions during key ownership changes. But inadequate agreements
can create problems when owners can least afford the turmoil. This article
explains some of the common valuation-related mistakes owners make when setting
up buy-sell agreements, including failing to define buyout terms, using
ambiguous or outdated valuation formulas, and misstating or failing to verify
financial data. The article emphasizes the importance of consulting with an
experienced valuation professional to ensure the agreement covers all the
bases.
No more cookie-cutter FLP
valuations
Attention to detail and thorough documentation are key
ingredients to preserving family limited partnership (FLP) valuation discounts.
This brief article notes some of the ways valuators support these discounts and
uses a case study to illustrate the need to consider state tax regulations and
provide well-founded written documentation in supporting FLP valuation
discounts.
Estate of Helen H. Berry, No. 1485
C.D., LEXIS 182, April 24, 2007.
Estate of Thompson, 382 F. 3d 367,
379, 3rd Cir. 2004.