What Judges Think: Desirable Qualities of Valuation Experts and Their Reports

Are you planning to hire a business valuation professional? Or, if you have already made the selection, is the expert you've
hired following best practices?

Judges and their fellow panel members at two 2009 forums - the NACVA/IBA Consultants' Conference and Business Valuation Resources' Summit on Business Valuation in Divorce - offered useful suggestions for desirable qualities of valuation reports and expert testimony. Here are some of the highlights:


Valuation reports must be logical, rational and clear, with transparent analysis of the company, the data, the factors supporting the conclusion, and the underlying rationale. If you don't understand a valuation report, chances are the judge won't either, and that makes it hard for the judge to reach a decision that will withstand review on appeal.


While the role of a lawyer is advocacy of a position, the role of the expert is roughly the same as that of the judge: to arrive at the truth. Anything else will diminish the expert's credibility.

The report must be reliable and performed using peer-reviewed methods, and the valuation professional must be experienced, well-prepared and sincere. The strengths and weaknesses of the valuation report should be self-evident, with clearly stated rationale for why areas or methods might have been ignored or omitted for lack of data or applicability.

In addition, experts who compare the small subject business to a Fortune 500 company or omit an exceedingly obvious item (even to a lawyer or judge) from a valuation are doomed to lose credibility. The same goes for an expert to gets on the stand and essentially says, "I know everything."

Experience and Credentials

Relevant credentials build credibility, and so does the expert's knowledge and experience in the area that is pertinent to the case. In court, an expert's credibility is based on the quality of his work, his transparency, and his objectivity. To be on the safe side, experts should always disclose to the lawyer anything in their past that might discredit their opinion - a rejected report, findings of incredibility by a certain judge, etc. - so that the attorney can prepare the issue for depositions and trial.


Experts should be adaptable and prepared to recalculate their values depending on what a judge or opposing attorney asks. An expert who takes the position that "nothing will change, my valuation stands as it is" loses credibility.

Intellectual Honesty

To further enhance credibility, your expert's opinion must be offered from a position of independence and free of bias and advocacy.

Intellectual honesty is undermined if the "independent" valuation expert is seated at the attorney table or passing notes to the attorney during opposing witnesses' testimony. While it is permissible for your expert to offer guidance regarding what questions to ask on cross-examination, that practice can blur the line between independence and advocacy. The same caution applies when an attorney comments on drafts or otherwise assists in developing an expert's opinion. Allow your expert to be credible, ethical and independent.


Rule 26 of the Federal Rules of Civil Procedure limits expert evidence to the content that is actually written or displayed in the report. Therefore, everything to which your expert testifies must be in his report.