We have a great deal of experience of valuing practices for a variety of purposes including retirements, disposals, mergers, incorporations and restructures, and increasingly with disputes. We also have experience of being appointed as a single joint expert witness to value practices where the owners are in dispute. However despite all of that experience, each valuation is bespoke and presents different challenges, especially with disputes.
In this particular case, we were approached by an individual that had left a law firm that he had established some years previously. The terms of the shareholders’ agreement provided for an independent valuation to be carried out following appointment of an arbitrator by the President of the ICAEW. Our remit was to work on behalf of the individual with his dealings with the arbitrator and the other parties to the dispute.
The other parties were to remain as owners of the practice and had offered a valuation of our client’s shares of almost £nil. Our client expected considerably more and had fallen out with his former colleagues as a result. Legal action had also been taken and each party was being advised by other lawyers. We therefore needed to liaise with the individual’s legal advisers, take care not to interfere with the legal process, or to adversely impact upon it.
What we did
We were instructed to carry out a valuation of the law firm for submission to the independent arbitrator. We prepared a fully substantiated valuation report taking into account all of the issues of the firm and the changes in the wider legal market. This was prepared on the same basis as if we were the independent arbitrator. We always take this approach and will only put forward a valuation that we could defend in court if required. We do not artificially inflate valuations as part of a negotiation process.
Our calculations showed a value of the individual’s shares in excess of £100,000. We submitted our report on that basis and responded to the other party’s submission on behalf of our client.
The independent arbitrator’s valuation was in line with our calculations and report and in our view provided a fair valuation for all concerned. More importantly for our client, it was a result that he was delighted with.
The author of this article is Tom Blandford of Armstrong Watson. Tom can be contacted at email@example.com or 07793 621 951. Other members of ALFMA can be contacted here.