Litigation Support

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.

Business Cases – Need for Timely Action

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:

Preliminary  Assessment

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.

Detailed Valuation Report

The next step is preparation of a detailed report, including full explanation of assumptions, approaches, and basis for conclusions.

Trial Preparation

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.

Expert Testimony

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).

Case Types

Business Damages

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 Business Value

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.

Non-Compete Agreements

Valuation of this type of intangible asset is often required in damages claims for breach of contract.

Partner Disputes & Marital Dissolution

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.
Seneca

Articles

By avm February 5, 2016 In
Proposed IRS regulations to eliminate discounts for family limited partnerships (FLPs) are to be released comment, but never seem to arrive.  The Obama Administration proposed changing the law over several annual budget proposals in order to restrict or eliminate valuation discounts on transfers of interests in family-controlled entities. The Administration was not successful in having the...
By avm February 5, 2016 In
Since mid-2012, a steady increase in median revenue from $350,000 to $450,000, led to higher small business sale prices. Overall, this year's small business transaction data is following the trend of the past few years: steady activity along with improving financials. Although total transactions are on pace to fall three percent from peak 2014 levels,...
By avm February 5, 2016 In
INTRODUCTION The valuation process typically does not assess the underlying company accounting policy and procedures. However, it is important for stakeholders to be aware of accounting conventions, and to vet them in any due diligence effort. The following is a discussion of different accounting policies and what risks they might introduce. Accounting guidelines allow companies...
By avm February 5, 2016 In
BUSINESS GOODWILL IN CALIFORNIA FAMILY LAW Three issues must be addressed in valuing business interests for the purposes of property settlements in family law. They are: Personal vs. Institutional Goodwill (Personal and Professional Goodwill are similar in nature – personal applies to all types of companies and professional applies to professional practices (i.e. medical practice,...
By avm February 5, 2016 In
Once a simple concept – reward employees for participating in the growth of a company’s value via stock options – incentive compensation has now become a very complicated area of tax regulation and accounting. At least since the creation of “qualifying stock options” in 1981, the IRS has required that options be priced at or...