Why is this Valuation Different Than All Other Valuations

Why is this Valuation Different Than All Other Valuations
by Kalman A. Barson, CPA/ABV, CFE, CFF
of The BARSON GROUP
www.barsongroup.com

It is possible that more business valuations are done for and in the context of divorces than for any other reason. However, the field of divorce presents a plethora of unique issues, some of which really have nothing to do with the technical aspects of business valuation. While the forensics, funds flow tracing, determination of income and determination of benefits is conceptually the same regardless of the purpose of the valuation, in some ways, divorce business valuation is like no other valuation.

There is likely no real transaction.

No matter what the rules are, Courts often create their own sense (and blend) of value.

Equity, or some interpretation of same, can be a driving factor in determining the value of a business.

The buyer of an interest in the business often has to continue to support the seller’s lifestyle.

Where part or all of the interest being valued was received via gift or inheritance during the marriage, or perhaps even prior to the marriage, present twists unique to divorce.

And then there’s the infamous “double dip”. In any valuation but a divorce valuation we merely have to value the interest at hand. In a divorce context, the person buying out the interest is also often called upon to maintain the lifestyle enjoyed during the marriage – to pay alimony, support or whatever. A problem arises, in the eyes of some, when we realize that it is the same “excess” income used in determining value, that same income which has created value, that is also being used at the same time for support. Is that fair – or is it a double dip. If it is a double dip, how do we address it.

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