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Beware of 'Calculations' of Business Value

By Rob Schlegel and John Kotlarczyk
May 16, 2011

Recent cases highlight how dangerous experts can be when they report that their finding of business value is based on a “calculation.” This wording has special meaning, implying a quick, cheap set of procedures that is tantalizing, especially for clients and attorneys struggling with placing a cash-equivalent value on an intangible asset, such as equity in a privately held business. Calculations are usually based on assumptions of the client (or perhaps the attorney), not on the independent judgment of the appraiser. But danger lurks in the darkness of ignorance, for these simplified “valuation” procedures are too often a crippled form of analysis without complete judgment that mistakenly conveys the assurance of a formal opinion expected of an expert.

Cases in Point

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