An Overview of the Role of Expert Witnesses in Business Valuations

Business valuation professionals provide a wide variety of services to their clients, from producing opinions of value to providing consulting services advising how a business owner can increase the value of their business. 

Among these services are expert witness services. Businesses, business owners, or their attorneys, typically engage these professionals when they find themselves in some kind of adversarial situation, ranging from a partner dispute to a high-stakes court case. 

In this overview, we’ll explore the role business valuation analysts play when they’re engaged to serve as expert witnesses. We’ll walk you through the services an expert witness provides and share the factors you should look for when evaluating professionals to serve as an expert witness. 

HoganTaylor is an accounting and advisory firm with locations across Arkansas and Oklahoma. Our team of business valuation analysts serves as part of our Forensic, Valuation, & Litigation Support group and works closely with attorneys, mediators, and other professionals to provide expert witness services in Arkansas, Kentucky, and beyond. 

Common Scenarios Where an Expert Witness is Required

There are many situations where a business, or a shareholder in a business, may seek the support of a business valuation expert witness service. These range from relatively amicable partner splits to highly adversarial litigation. Often, it is the attorney leading the case that hires an expert witness. 

Below, we’ve summarized some of the most common situations where you or your business may engage an expert witness in business valuations:

Partner Dispute

When business partners decide to part company, the departing party will often seek to sell their equity. Engaging a business valuation firm to determine the value of this equity stake ensures that the departing individual receives fair consideration for their equity. These situations may be negotiations where each side retains its own advisor.

Alternative Dispute Resolution 

If a dispute is less amicable but parties do not want to engage in litigation, they may enter alternative dispute resolution facilitated by an independent mediator or arbitrator. This independent third party will often engage a business valuation firm to prepare an independent valuation report that evaluates the facts and assigns a value to the business. 

Litigation

Any time there is litigation where the value of a business, the value of a portion of a business, or economic damages related to a business are in dispute, attorneys will retain an expert witness to testify to the court. This is perhaps the most common scenario where businesses and attorneys engage a business valuation expert witness.

Divorces

Expert witnesses can be engaged to testify to a judge about the value of a business that is to be divided up as part of divorce proceedings. 

What Does an Expert Witness Do? Exploring the Expert Witness Process

Expert witnesses are typically engaged by attorneys on either side of litigation where the value of the business is in question. The process and timeline will largely be driven by the characteristics of each individual case. However, in general terms, the process follows these steps:

1. Production of an Expert Witness Report: the business valuation analyst will work independently to produce an opinion of value. This report will outline the facts and analysis, providing an independent opinion on the value of the business in accordance with well-established business appraisal standards. This report is shared with both parties. 
2. Deposition: in an active litigation, opposing counsel may depose the expert witness to learn more about their testimony. They will ask a range of questions related to the business valuation report to gather information ahead of trial. 
3. Trial: Though the vast majority of cases settle, many do go to trial. In these cases, the business valuation analyst will be called as an expert witness to testify to the judge or jury, where they will be cross-examined by opposing counsel. 

Business valuation analysts are bound by professional standards and must remain independent. There is a misconception that expert witnesses serve as advocates for their clients, when in reality, the expert witness is advocating for their professional opinion. Valuation analysts must follow rigid valuation frameworks that meet certain legal standards. 

How to Choose an Expert Witness in Business Valuations

To serve as an expert witness in business valuations, a professional must have a specific set of qualifications and expertise. Business valuation expert witnesses will often have the Accredited in Business Valuation (ABV) credential. Many also have Accredited Senior Appraiser (ASA) status as well as Certified Valuation Analyst (CVA) status. 

However, you should consider these qualifications table stakes when evaluating expert witnesses in business valuation. The best expert witnesses are highly persuasive and possess the ability to explain complex valuation methods in simple terms that judges and juries can understand. 

To find the best expert witness, it’s important to vet potential candidates to determine their experience. At HoganTaylor, our Forensic, Valuation & Litigation Support team holds an excellent reputation in Arkansas, Oklahoma, and beyond, built through years of working with the local legal community to produce reports and testimony that stands up to the rigors of the litigation process. 

HoganTaylor: Business Valuation Expert Witness Firm in Arkansas and Oklahoma

Expert witnesses in business valuation can play an important role in all kinds of situations, ranging from relatively amicable partner splits to high-stakes litigation. Finding a trusted partner with a reputation for precision and integrity can be instrumental to your case. 

At HoganTaylor, our business valuation analysts have years of experience serving as expert witnesses in cases across Arkansas, Oklahoma, and the surrounding states. Our nationally recognized valuation experts take a rigorous approach that leverages best practices and a wealth of empirical evidence to produce credible, supportable valuation reports. 

To learn more about HoganTaylor’s business valuation and expert witness testimony services, contact a HoganTaylor expert today. 

How HoganTaylor Can Help

If you have any questions about this content, or if you would like more information about HoganTaylor’s Forensic, Valuation & Litigation Support practice, please contact Clay Glasgow, CPA, ABV, CFF, CFE , Advisory Partner. 

INFORMATIONAL PURPOSE ONLY. This content is for informational purposes only. This content does not constitute professional advice and should not be relied upon by you or any third party, including to operate or promote your business, secure financing or capital in any form, obtain any regulatory or governmental approvals, or otherwise be used in connection with procuring services or other benefits from any entity. Before making any decision or taking any action, you should consult with professional advisors.