Our last newsletter covered the topic of covered insurance vs. uncovered insurance. This newsletter addresses company valuations for use in a court setting.
Different experts can apply different tools to assess a company’s value, and in doing so, often tip their hand to the opponent’s side, while not intending to. Valuation metrics often include assigned items such as: industry benchmarks, company size, market share, total annual sales, geographic base, sales channels and contracts. You could also review and assign a value to things like: strategic personnel, designs, formulas, patents, technology, recruitment, retention, and marketing knowledge.
For example, you could say that our car’s engine is faster and runs more smoothly than the competitors’. You could also assign a value to items such as future plans for growth and expansion, the company’s reputation, and other embedded positives.
Another area to consider is profitability. If one company consistently makes more money than another, does this mean it is more valuable? Not necessarily. It may only mean that it is better able to realize its potential than the competition. It may not have as many hurdles or barriers than the other company. Conversely, the other company might have lower margins, but its people are better motivated and so it becomes a popular brand.
Think of valuations like looking at all the ingredients of a cake. When going through the discovery process, experts should request more than a list of assets and the entity’s financial statements. They should also be careful to protect legal privilege so it is upheld during the entire litigation process.
Sultan & Co. : Helping Attorneys Win Cases. Since 2008.