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Neutral business valuation is typically part of any Collaborative divorce, and has a number of important advantages over each spouse hiring his or her own expert, including:
- Much less costly.
- Assuming the manager-spouse provides the necessary data on time, much faster.
- In a Collaborative divorce, the objective is to deliver an opinion on which the spouses can agree, understand, and believe is fair. Therefore, there is no need to “defend” the firm’s opinion from withering cross-examination.
- Instead of the ill feelings that inevitably flow from an adversarial valuation process, a neutral process can provide the basis for a more collaborative atmosphere for the resolution of other financial and, even, non-financial issues. After all, if the couple can come to an agreement on a nettlesome problem like the value of the business, they should have a good shot at successfully negotiating other matters.
Effective Referrals
Relative unfamiliarity with the specific business in question, and with financial matters in general, will typically cause the non-manager spouse to fear that s/he is severely disadvantaged. The manager-spouse, on the other hand, often believes that the non-manager spouse views the business as some kind of money tree. “On the contrary,” s/he thinks, “without me, the business is worth nothing.” It is critical that a competent and trusted business valuation professional keeps the burner under this volatile emotional stew on Low.
The referring professional, such as an attorney, should ensure that the individual s/he selects has the following qualities.
- A reputation for honesty, integrity and impartiality, including in court, where the line between expert and advocate is so easily crossed.
- Experience in neutral business and professional firm valuation, especially in the context of family law.
- A keen understanding of, and feel for, the human relations aspects of divorce in general, and business value negotiation in particular.
- A commitment to the Collaborative divorce process, as evidenced by training, group membership and active participation in fostering the growth of Collaborative Practice in his or her community.
First Meeting
The first meeting can include respective counsel and/or the neutral Financial Specialist, but there is a cost associated with enlarging the meeting, and that is generally not necessary. For both spouses to embark on a calm and productive valuation process, certain key elements must be established from the outset.
- The expert’s credentials (experience, expertise, publications, etc.) impart a sense of confidence in this individual’s technical competence.
- The manager-spouse must feel that “reality” will be front and center in this process – especially, that value will constitute what it is worth to the manager-spouse to own the community’s entire interest in the business (rather than his or her community property half) and not what it is worth to some hypothetical outside buyer.
- The non-manager spouse must believe that the valuation expert will control the flow of information and analysis.
- The expert is, in truth, totally impartial. Making it clear from the outset that the expert will not be available to perform consulting assignments for the company down the line will go far to cement this critical impression.
- The process will be transparent and approachable to all concerned, including both spouses and all advisors. If, at any time, either spouse wants the expert to look at an issue, talk to an individual and/or review a document, the expert should do so, irrespective of whether such an investigation promises to be productive.
- The parties must receive a firm fee quote, rather than a request to sign up for some open-ended hourly commitment. Divorce is stressful enough without having to worry about how much the next coffee break is going to cost.
- Finally, the expert must confirm the impression that s/he has no ego in the game. The best way to accomplish this is to have the report be “Preliminary” in nature. If any party to the process can make a convincing case that revisiting any aspect of the valuation process could have a significant impact on the expert’s opinion, s/he should do so without objection or delay and, then, furnish a Final Report in due course.
Conclusion
Collaborative divorce is a splendid out-of-court process that can assist the spouses to communicate more effectively and to negotiate more productively. If the parties make the necessary commitment to the process, they have a much better chance to maintain human decency, protect their children, and to help the entire family to get on the other side of the divorce decree in one piece.
It is well worth the effort.
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This article has been contributed by Steven D. Popell CMC (Certified Management Consultant.) Steve has been qualified as a business valuation expert since 1974, and has published extensively on this topic. CMC, a certification mark awarded by the Institute of Management Consultants USA, represents evidence of the highest standards of consulting and adherence to the ethical canons of the profession. Steve was a 2007 winner Collaborative Practice California Eureka Award for contributions to Collaborative Practice in this state and is a Senior Partner in Popell & Forney, with offices in Los Altos Hills and Pleasant Hill, California.