Six Tips for Valuation Experts in High Stakes Divorces
The headlines announcing Brad Pitt and Angelina Jolie’s divorce were just the latest in a slew of stories about celebrity splits. In fact, there are more than 800,000 divorces and annulments in the United States each year, according to government statistics. Based on my experience performing valuations in many high-profile divorces, much of the advice I’d offer to my fellow practitioners applies whether you’re working with Brad and Angelina or the divorcing, high-powered owner of a local business. Below are my top tips:
- Determine what’s at stake and how location matters. The assets in a divorce will typically include cash, retirement funds or a home. Often, the largest asset at stake is a closely held business. That can be a professional practice – if one or both partners are, say, a lawyer, physician or accountant – or an operating entity, such as a retailer, wholesaler, manufacturing business or a farm. The complexity of the engagement can be affected by the jurisdiction in which the case is being heard and can depend on state law. Be prepared, as the legal environment may produce unexpected complexities.
- Expect complicated holdings to make for complicated valuations. Brad and Angelina are globetrotters. Valuations in divorces like theirs are typically more complex not only because of the range of their assets, but also the international nature of their lives. In one case, I worked with a divorcing, high-profile spouse who owned businesses in Australia, the United States and South America. The divorcing parties were Australian, but the divorce was taking place in the United States, so that alone added complexities because of the different laws and distribution rights. In addition, the risk profile of a business in some parts of South America is higher than for one in the U.S. or in Australia, and that will affect the valuation. The more diversified the assets and the lifestyle, the more complexity you may find.
- Maintain an objective sense of value even if the spouses don’t have one. I was involved in another case in which the couple had assets in the hundreds of millions of dollars, but they were fighting over who gets the china and how much it’s worth. I’ve seen divorcing spouses willing to give up assets worth $10 million, as long as they get the family dog. In these situations, I always ask about any intangible value we haven’t considered. The lesson here is that divorcing spouses may not always have a realistic perspective on business or asset value. In many cases, they’re willing to give up value and fight for something for emotional reasons. That doesn’t change the nature of a CPA’s work or approach, but it’s something you may encounter in a highly charged case.
- Let your client know you care. This is always true, but often there are clients who expect more outreach, particularly in a high-profile divorce case. I usually try to keep my communications straightforward and concise. When I was working with a very wealthy client, he called to fire me because he didn’t believe I was paying enough attention to his case, based on the volume of communications he received from me. I immediately called him to discuss his concerns and was able to explain the reason for my perceived lack of communication. He ended up changing his mind. No matter how busy a client may be, they take notice. So, it’s important for them to see and feel they’re being taken care of.
- Have the right tools to make your points in the courtroom. Good communication is essential in court. To convey complex concepts, I find that demonstratives – or graphics – are critical for clarifying my points, such as graphs that show growth in value or pie charts that demonstrate market share or other concepts. They break down the information in a way that any audience can understand. And even though it may not be used in court, a well-written report is also key to a strong case.
- Your success will depend on your networking skills. Divorce valuation is a unique niche, and those who are successful develop and maintain strong relationships with legal professionals in the same field and at the same level. Family law attorneys are the gatekeepers who choose the valuation professionals for their cases. Once you’re hired, you will start to get referrals for other cases.
Divorce is tough on everyone involved, no matter how high the stakes. The role you play is valuable, as you provide much needed information at a time of great uncertainty. That’s why it’s important to assure clients that your work is sound and trustworthy.
The AICPA’s Forensic and Valuation Services section is a great resource for forensic and valuation specialists, as it offers solutions to providing the best professional services. The Certified in Financial Forensics and the Accredited in Business Valuation credentials are another way for forensic accounting and business valuation professionals to position themselves as trusted advisers in two of the fastest-growing specialty areas for CPAs.
Neil J. Beaton, CPA/ABV/CFF, CFA, ASA, Managing Director, Alvarez & Marsal Valuation Services, LLC. With more than 25 years of experience analyzing both closely and publicly held companies, Neil specializes in the valuation of public and privately held businesses and intangible assets for purposes of litigation support, acquisitions, sales, buy-sell agreements, ESOPs, incentive stock options and estate planning and taxation. Neil recently presented sessions on report writing and the use of demonstratives at the 2016 AICPA Forensic and Valuation Services Conference.
Man signing divorce papers image courtesy of Shutterstock