Winning in litigation is about having the best arguments. This an area where AVM shines, with financial models and report design that exceeds the expectations of courts – which have said, and continue to say: “State Your Case!”
American ValueMetrics provides comprehensive support for all types of litigation and dispute resolution by applying heuristics to the assemblage of valuation data and getting to the point that the court, and investors for that matter, want to hear.
In business cases, it is critically important for a plaintiff to engage the valuation firm early to have adequate time to complete the damages assessment in time to meet court deadlines. Under the Federal Rules of Civil Procedure, the Plaintiff must submit a computation of damages and supporting evidence shortly after the Defendant answers the complaint. In practical terms this means that the damages assessment valuation must be done before filing the complaint to comply with the rule. Since the Plaintiff prepares the assessment and must “live with it”, it becomes the basis for immediate settlement negotiations. Not having the damages assessment prepared in a timely manner is a common cause of failures for these claims.
Litigated cases typically fall into one of three groups – tax-related, business damages, and marital dissolutions. Tax related issues are virtually all business valuation issues. In damages and partner dissolution cases, about 65% of our advisory services is used as a basis for settlement, and 25% used to reach mutual agreement to dismiss. For the cases that fail to settle, we expect 7 out of 10 to be resolved by summary judgment. Nationally, only 3% of cases proceed to full trial.
Our senior professionals often serve in litigation matters as experts. American ValueMetrics’ roles may include the following:
AVM may initially prepare a Summary Valuation of Business Interests, with appropriate discounts for lack of control and marketability. It is an early analysis of lost profits and damages. The process may include consultation with attorney and client and reviewing other experts’ reports.
The next step is preparation of a detailed report, including full explanation of assumptions, approaches, and basis for conclusions.
AVM will help develop strategy and key points with client and attorney. If necessary, AVM prepares a rebuttal report to opposing expert witness reports and may participate in settlement conferences.
When engaged as an expert witness, AVM presents valuation opinions in an objective manner and undergoes cross-examination. Our expert explains the opinion based on the data, assumptions and conclusions developed in the valuation report(s).
Valuation of business damages fall into three general categories, Lost Profits, Lost Value and Intellectual Property. Damages are usually Lost Profits and Reasonable Royalty determinations. U.S. statistics show about 67% of cases are for Reasonable Royalty damages, 28% for Lost Profits damages, and 5% for Price Erosion damages. Our experience is about the same.
Lost Value damages are a breach of an obligation other than breach of contract and can be quantified by a ‘before and after’ valuation of the subject company.
Valuation of this type of intangible asset is often required in damages claims for breach of contract.
We provide valuations of business interests for settlement in either the collaborative approach or in the litigated approach. In the collaborative approach we are engaged by both sides to prepare an independent valuation, which is then used for settlement negotiations. In the litigated approach we typically work for one side, where the value is disputed and goes to court.
The rules for distributing business wealth between marital parties vary widely from state to state and these considerations are communicated to the client so that they are aware of their tactical situation.
Everything hangs on one’s thinking.