Valuing a business interest, asset, or liability can be essential in litigation, transactions, or strategic planning. The selection of the right valuation expert is often pivotal to the outcome of a case or deal. And while experts are frequently retained for litigation purposes, their value extends far beyond the courtroom. Business owners, corporate counsel, and financial professionals may require valuations for tax compliance, internal planning, or regulatory purposes.

Early Engagement Is Key

Involving a valuation expert early in the process is critical particularly in the context of litigation, where expert disclosures, report deadlines, and depositions are governed by strict procedural rules. In non-litigation contexts, early expert involvement can support efforts such as fundraising, equity transfers, and financial planning by providing credible documentation for third parties.

Megan Becwar of Dispute Economics LLC underscores the importance of proactive engagement by noting that it allows experts to provide strategic input before any legal or transactional missteps occur.

Jin Yan, partner at ArentFox Schiff LLP, adds that waiting too long may create logistical challenges, including conflicts with the expert’s schedule or insufficient time for proper analysis.

Aligning the Expert With the Assignment

Valuation assignments differ widely depending on the context. Becwar explains that some experts specialize in compliance-related work while others are more suited to litigation. It is critical to ensure that the expert’s experience aligns with the nature of the engagement, whether it’s financial reporting, tax matters, shareholder disputes, or business interruption claims.

If the subject of valuation includes specialized assets, such as real estate, machinery, or financial instruments, additional appraisal professionals may be needed. Brandi Ruffalo, Managing Director, Valuation & Forensic Partners LLC, points out that in some cases, both a business valuation expert and a real estate appraiser must collaborate to produce a complete analysis.

Sourcing a Qualified Expert

Most attorneys and professionals locate valuation experts through referrals and prior professional relationships. Yan stresses the value of relying on trusted colleagues for recommendations, particularly when they have firsthand experience working with a specific expert in trial settings.

Even if an expert comes highly recommended, proper due diligence should be done by reviewing their CV, published materials, past testimony (if relevant), and soliciting feedback from past clients directly.

There are several professional designations that signal competence in valuation, including:

• ASA (Accredited Senior Appraiser, American Society of Appraisers)
• ABV (Accredited in Business Valuation, AICPA)
• CVA (Certified Valuation Analyst, NACVA)

Ruffalo notes that while credentials provide a baseline, real-world experience is equally important. Understanding industry dynamics and operational factors is crucial, particularly when valuing private or closely held businesses. Trial experience differentiates experts who can effectively communicate findings in court.

Understanding Standards and Premises of Value

A fundamental aspect of valuation is selecting the appropriate standard and premise of value. Standards may include fair market value, fair value (typically used in shareholder litigation), investment value, or intrinsic value. Each standard reflects a different definition of value and has legal and financial implications. Ruffalo emphasizes that understanding how state and federal courts interpret these concepts is essential, as variations can significantly affect outcomes.

There is no ‘one-size-fits-all’ method for valuation. Common approaches include:

• Income Approach (e.g., discounted cash flow)
• Market Approach (e.g., comparable company analysis)
• Asset-Based Approach (e.g., book value or liquidation value)

While most valuation professionals are familiar with these methods, Becwar cautions that not all experts are equally equipped to handle damage calculations or litigation-specific analyses. It is important to confirm that the expert has experience with the methodology most applicable to the situation at hand.

Addressing Perceptions of Bias

Transparency about prior engagements and maintaining objectivity is essential to preserving the expert’s credibility, particularly in a legal context. Judge Christopher Yates, of the Michigan State Appeals Court, highlights the potential perception problems that arise when a single expert is retained repeatedly by the same attorney or law firm. He emphasizes that in jury trials, opposing counsel may use such patterns to argue that the expert is biased or beholden to the retaining party.

A Note About Privilege and Confidentiality

Communications between attorneys and valuation experts are not always protected. Yan explains that under Federal Rule of Civil Procedure 26, communications with testifying experts are discoverable in part, particularly those involving compensation, data, and assumptions provided by counsel.

Judge Yates adds that communications with non-testifying experts generally receive broader protections, particularly under the work product doctrine. However, converting a consulting expert into a testifying expert later in the case may expose previously confidential materials.

Ruffalo notes that, regardless of privilege, experts should proceed with the expectation that their work product and communications may be disclosed, and should structure their documentation accordingly.

Conclusion

Early engagement allows valuation experts to contribute meaningfully to strategy, discovery, and case development. A well-qualified valuation expert can provide clarity in even the most complex disputes or transactions and is often indispensable to achieving a successful outcome. In selecting a valuation expert, legal and financial professionals should seek experts with relevant experience, industry expertise, a track record of satisfied clients, and a demonstrated ability to communicate complex findings persuasively in court.

To learn more about this topic, view Selecting the Right Valuation Expert. The quoted remarks referenced in this article were made either during this webinar or shortly thereafter during post-webinar interviews with the panelists. Readers may also be interested to read other articles about valuation.

This article was originally published here.

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