the business appraiser surviving cross examination

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SO YOU THINK WE DON’T CHECK? SURVIVING CROSS- EXAMINATION OF THE APPRAISAL EXPERT A Lawyer’s Point of View© Business Valuation Resources and the American Society of Appraisers Present: Divorce: A Hands On Workshop for BV Practitioners

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How the business appraiser should prepare for and survive cross-examination.

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Page 1: The Business Appraiser   Surviving Cross Examination

SO YOU THINK WE DON’T CHECK?

SURVIVING CROSS-EXAMINATION OF THE APPRAISAL EXPERTA Lawyer’s Point of View©

Business Valuation Resources and the American Society of Appraisers Present:Divorce: A Hands On Workshop for BV Practitioners

Page 2: The Business Appraiser   Surviving Cross Examination

What Do Lawyers Do With a Business Valuation Report?

The Opposing Lawyer’s Job

Discredit the Business Valuation Report

Discredit the Business Appraiser

Business Valuation Resources and the American Society of Appraisers Present:Divorce: A Hands On Workshop for BV Practitioners

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Page 3: The Business Appraiser   Surviving Cross Examination

How Lawyers Do Their Job

We Read And Critically Analyze Every Word of the Report

Nothing is Accepted at Face Value

Nothing is True Until Proven to Be True

Business Valuation Resources and the American Society of Appraisers Present:Divorce: A Hands On Workshop for BV Practitioners

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Page 4: The Business Appraiser   Surviving Cross Examination

The Lawyer’s Deconstruction of the Business Valuation Report

1. Is the Appraiser’s CV Accurate?

2. Are there Typographical, Mathematical or Computational Errors?

(“Death by a Thousand Cuts”)

3. Is there any Plagiarism?

4. Has the Appraiser Complied with Applicable Business Valuation Standards and Ethical Rules?

5. Has the Appraiser Complied with Applicable State Law?

6. Did the Appraiser Correctly Apply the Selected Methodology?

Business Valuation Resources and the American Society of Appraisers Present:Divorce: A Hands On Workshop for BV Practitioners4

Page 5: The Business Appraiser   Surviving Cross Examination

The Lawyer’s Deconstruction of the Business Valuation Report

7. Is the Data Used Accurate and Sufficient to Support the Opinion of Value?

8. Did the Appraiser Retain the Required Documentation in the Work File?

9. Did the Appraiser make Appropriate Financial Statement Adjustments?

10. Is the Economic and Industry Data Utilized Reliable?

11.Did the Appraiser Conduct a Site Visit and Management Interview?

12.Does the Appraisal Report Indicate Bias or Advocacy?

Business Valuation Resources and the American Society of Appraisers Present:Divorce: A Hands On Workshop for BV Practitioners

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Page 6: The Business Appraiser   Surviving Cross Examination

The Keys to Bullet Proofing Your Business Valuation

Report and Testimony

1. THE DEVELOPMENT AND DOCUMENTATION OF THE

OPINION OF VALUE

2. THE WRITING OF THE REPORTBusiness Valuation Resources and the American Society of Appraisers Present:

Divorce: A Hands On Workshop for BV Practitioners

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Page 7: The Business Appraiser   Surviving Cross Examination

Document The Work File

Include Everything

Do Not Purge the Work File

Do Not Communicate by Email

Keep the Work File Organized

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Business Valuation Resources and the American Society of Appraisers Present:Divorce: A Hands On Workshop for BV Practitioners

Page 8: The Business Appraiser   Surviving Cross Examination

Have Absolute Knowledge of the Relevant Facts

1. Conduct Due Diligence Interviews

A. Verify Company History/background

B. Verify Company Financial Information

2. Conduct a Site Visit

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Business Valuation Resources and the American Society of Appraisers Present:Divorce: A Hands On Workshop for BV Practitioners

Page 9: The Business Appraiser   Surviving Cross Examination

Double Check the Data 1. Reporting and Use of National, Regional and Local Economic Information

2. Reporting and Use of Comparables

3. Don’t Use Material from Internet Sources that is Not Validated by Other Unimpeachable Sources

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Business Valuation Resources and the American Society of Appraisers Present:Divorce: A Hands On Workshop for BV Practitioners

Page 10: The Business Appraiser   Surviving Cross Examination

The 4 Worst Report Writing Errors

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a) Hedge Words & Equivocation

b) Use of Generalities

c) Use of Absolutes

d) Assumption and Presumptions

:Business Valuation Resources and the American Society of Appraisers Present:

Divorce: A Hands On Workshop for BV Practitioners

Page 11: The Business Appraiser   Surviving Cross Examination

Report Writing Errors

Error No. 1

Hedge Words & Equivocation

• “It is Not Unreasonable to Believe….”

• “It Can Be Recognized That…..”

• “On Average”

• “ For The Most Part”

• “It Appears to Be” & “Apparently”

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Business Valuation Resources and the American Society of Appraisers Present:Divorce: A Hands On Workshop for BV Practitioners

Page 12: The Business Appraiser   Surviving Cross Examination

Report Writing Errors

• Error No. 2

• Generalities

–“In General”

–“Commonly Recognized”

–“ The Valuation Professional”

….“Uses” or “Recognizes”

–“ Substantially….(“More/Less”)

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:Business Valuation Resources and the American Society of Appraisers Present:

Divorce: A Hands On Workshop for BV Practitioners

Page 13: The Business Appraiser   Surviving Cross Examination

Report Writing Errors

Error No. 3

Absolutes

– “Obvious” or “Obviously”– “Conclusive” or “Conclusively”– “Self-evident”– “Industry Rule”– “The Majority Position”

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Business Valuation Resources and the American Society of Appraisers PresentDivorce: A Hands On Workshop for BV Practitioners

Page 14: The Business Appraiser   Surviving Cross Examination

Report Writing Errors

• Error No. 4• Assumptions & Presumptions

• Danger! Danger! Danger!

• “It is Assumed”• “It is Presumed”• “It is Believed”

• “It is Understood”• “It is Implicit That…”

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Business Valuation Resources and the American Society of Appraisers PresentDivorce: A Hands On Workshop for BV Practitioners

Page 15: The Business Appraiser   Surviving Cross Examination

Do Not Plagiarize

• Plagiarism is:a) Copying what somebody else has written

b) Taking somebody else’s idea and trying to pass it off as original

c) Something copied from somebody else’s work or

idea that somebody presents as his or her own

(MSN Encarta Dictionary 2006: English (North America).

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Business Valuation Resources and the American Society of Appraisers Present:Divorce: A Hands On Workshop for BV Practitioners

Page 16: The Business Appraiser   Surviving Cross Examination

The Top 4 “Don’ts”

1. Don’t Make Yourself Vulnerable to “Death by A Thousand Cuts”

2. Don’t Make Report Writing Errors

3. Don’t Fail to Document the Work File

4. Don’t plagiarize

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Business Valuation Resources and the American Society of Appraisers Present:Divorce: A Hands On Workshop for BV Practitioners