Partnership Dispute Business Valuation
Need Help with Business Valuation for Litigation or Mediation? Call Hendershot Cowart P.C.
Accurate business valuation can be critical when a dispute arises between business partners. To resolve disputes, the partners will need an accurate valuation of their business to determine how to equitably divide the company and part ways if necessary. Hendershot Cowart P.C. can help.
If you need help with business valuation related to a partnership dispute, call our partnership dispute lawyers in Houston, Texas at (713) 783-3110.
When Is Business Valuation Necessary and Why Is It Important?
Business valuation determines the actual worth or economic value of a business. A valuation may become necessary when a business partnership dissolves – due to conflict, retirement, or other circumstance – when seeking new investors, during M&A, or when a business partner must divide community property in a divorce.
Because the valuation may be challenged or cross-examined in court or by a mediator or in arbitration, it must be as accurate as possible and focus on objective facts and data.
To obtain this valuation, your attorney will identify and collaborate with an independent business valuation services firm specifically trained to perform valuations for litigation scenarios. We will ensure the business valuation firm has the reputation and depth of experience to handle your situation – including experience with similarly sized companies and with the type of litigation you are facing.
Typically, a business valuation expert will look at three- to five-years of income, expenses, profits, losses, tax returns, and other relevant business documents, and then use several different valuation methods to get the most accurate valuation figures. Your litigation team will help acquire the necessary documentation for the valuation expert, using the discovery process if necessary.
On average, valuation takes approximately two weeks. It might take longer depending on the size and complexity of your business.
Methods of Valuation
There is no “one” business valuation method – valuation is more often described as an art than a science. As a result, valuation services firms may determine the value of your company using several different methods.
Here a few of the more common business valuation methods for the litigation environment:
- Look at the stock prices or transaction prices of similar companies (the market approach or comparable company analysis). This method compares the value of your company to others in your industry – often competitors.
- Estimate the income or after-tax cashflow your company is expected to generate (the income approach).
- Find out how much your business assets – both physical and intangible – are worth (the asset approach).
All the valuation methods include subjective measures, so using multiple methods of valuation may produce the most reliable and defensible results. Of course, some methods may be more appropriate for some companies than others.
For example, the market approach is more applicable to a company with publicly traded counterparts, while the asset approach makes more sense for a business that is asset rich.
In litigation, mediation, or arbitration, both sides of the dispute will likely present competing valuations that best support their position. An experienced valuation services firm can also assist your attorney by identifying the weaknesses of the opposing party’s valuation report.
Help resolve your business valuation dispute with the Houston partnership and shareholder dispute attorneys at Hendershot Cowart P.C. We will identify the best business valuation services firm for your matter and work together to reach a resolution.
Fair Market Value vs. Fair Value
Whichever methods of valuation are used, the final value will adhere to one of two standards: “fair market value” or “fair value”.
In fair market value, your valuation team estimates how much you would get for your business if you sold it on the open market.
In fair value, your litigation valuation expert uses facts and figures to find out how much 100% interest in your business would be worth.
Generally, fair market value includes more adjustments and discounts than fair value since it varies with market forces, while fair value may provide a more stable financial figure.
In disputes expected to end in the dissolution of the partnership or when valuing the business for the purpose of one partner’s divorce, the parties will likely focus on fair value.
How Is Valuation Affected by a Buy-Sell Agreement?
Some partnership agreements will include a buy-sell provision which creates a mechanism to establish the value of the business in the event of one partners’ retirement, death, bankruptcy, or divorce of one of the owners.
If a buy-sell or buyout agreement is incorporated into the partnership or shareholder agreement, ask an attorney experienced in contract law and partnership disputes to review the agreement and advise you of your options.
How Hendershot Cowart P.C. Can Help
Any valuation used in a dispute will be subject to scrutiny. As such, you will not only need a thorough and accurate valuation but also methods and figures that stand up in court. We will identify the best valuation services firm for your matter and work with these experts to identify and collect the documents they need, through the discovery process if necessary. Our valuation partners will then give us the facts we need to resolve a shareholder or partnership dispute requiring business valuation.
With Hendershot Cowart P.C., you will know what’s going on with your case from start to finish and have a team of professionals who are committed to your success. We value going above and beyond for each of our clients.
Give Hendershot Cowart P.C. a chance to exceed your expectations – call us at (713) 783-3110 or contact us online to schedule a consultation.
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