When a marriage breaks down, the divorcing couple’s assets must be divided fairly. Often, the parties’ business interests comprise a significant proportion of their overall assets, so business valuations for divorce proceedings are key to ensuring an equitable settlement. Forensic accountants play a pivotal role in business valuations for divorce proceedings.
At Frenkels Forensics, our specialist divorce team works with many of the UK’s leading family law firms and barristers’ chambers, assisting them in establishing the value of any businesses with which one or both parties to divorce proceedings are involved. We are also regularly instructed to act as expert witnesses in divorce proceedings. We provide an objective, impartial appraisal of the relevant businesses’ values, and the parties’ overall financial situations to enable the court to achieve a fair outcome.
For assistance call us on 0330 118 8200 or Make An Online Enquiry.
What Is The Purpose Of Business Valuations In Divorce?
Dividing a divorcing couple’s assets can often be one of the most complicated and hardest-fought aspects arising from their separation, particularly when businesses are involved. Placing a value on a business tends to be far more complex than valuing other assets, such as the marital home. Accordingly, expert input from forensic accountants like ours is usually required.
Where an individual’s financial situation includes business interests, those interests must be included in their overall assets for the purposes of the divorce financial settlement. While only the value of the party’s individual interest is taken into account, the process often necessitates valuing the business as a whole. The business interests are added to the party’s other assets and income, and the figures are used to facilitate settlement negotiations, or by the court when making a financial order.
How Do Business Valuations In Divorce Work?
Business valuations in divorce are based on what a hypothetical buyer would pay for the business, notwithstanding that there is often no intention to sell. Valuing a business can be an incredibly tricky task since there is no one method that works in every situation. Business valuations in divorce are more of an art than a science, and the appropriate method in any given case depends on a variety of factors, including the size and type of business involved, its assets, and the industry and sector in which it operates. Some valuations may necessitate combining several different methods to reach an accurate result.
What Methods Can Be Used In Business Valuations For Divorce?
We use a variety of methods when carrying out business valuations for divorce. Two of the most common are the net assets method and the capitalised future maintainable earning method.
• Net Assets Method
The net assets method is a type of business valuation for divorce that focuses on valuing a company’s assets, such as property, stock, machinery and intellectual property, and then deducting its liabilities to ascertain a fair market value.
The net assets method is often used when valuing asset-rich businesses, such as property investment companies and investment funds.
• Capitalised Future Maintainable Earning Method
Capitalisation is the return on investment an investor can expect from a business. It is based on the business’s sustainable profits and the expected risk return. When using this method in business valuations in divorce, we analyse the business’s historical trading patterns and forecasts to accurately predict its sustainable business profits.
The capitalised future maintainable earning method is widely used when valuing small and medium-sized businesses.
How Can We Help In Business Valuations For Divorce?
Many couples seek to settle their issues through non-adversarial methods, such as the collaborative family law process or mediation, which can keep matters amicable, limit costs, and speed up the divorce process. However, whatever method they choose, a fair outcome depends entirely on the parties giving full and frank disclosure of their financial position, including their business interests. When the parties feel confident that they are in possession of the complete facts and circumstances relating to their ex-partner’s assets, the chances of them reaching an amicable settlement are significantly increased. Our forensic accountants’ work focuses on establishing a party’s financial situation, including any business assets, and providing a comprehensive report for use by the parties and their legal advisors in settlement discussions.
If the parties cannot reach an amicable financial settlement, they can apply to the court for a financial order. To assist the judge in establishing the extent of each party’s assets, the court will often direct that a single joint expert be appointed to value the couple’s business interests.
Single joint experts are instructed jointly by the parties to provide an independent business valuation and, where necessary, to attend court to explain their findings to the judge. Our forensic accountants are regularly instructed to act as single joint experts to prepare business valuations in divorce cases. We are familiar with the provisions of the Civil Procedure Rules and our duties to the court and have extensive experience in court practice and procedures. Our reports are comprehensive and user-friendly, and often have a significant impact on the outcome of the financial settlement.
To discover more, please call us on 0330 118 8200 or Make An Online Enquiry.
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