Growth brings complexity, and complexity brings a host of unique challenges, including high-stakes conflict. Unless properly leveraged, litigation can siphon time, money, and other valuable resources away from your company’s daily operations. When your company is facing a dispute, the stakes are high. It is essential to employ a progress-driven strategy supported by data and proven results.
At Hone Law, our team of forward-thinking commercial and business litigation lawyers brings a century of combined experience to the table. Through our unique case management and technology-driven approach, we are better able to weigh the value of your business against potential damages to determine the right path forward for your company. To learn more, connect with us at (702) 608-3720 today.
Why Should You Determine the Value of Your Business In a Commercial Dispute?
Business valuation refers to determining the economic worth of a company. The reason for performing a business valuation typically falls under one of four categories:
- Transactions including exit planning, financing, or buy-sell agreements.
- Tax reporting to assess gift and estate tax or charitable contributions
- Financial reporting for employee stock plans, derivatives, or intellectual property, for instance
- Litigation to resolve commercial disputes
In the context of commercial disputes, the valuation process typically spans the entire length of the case, helping guide the discovery process, develop an effective trial strategy, and inform settlement discussions. An objective, evidence-based business valuation is an indispensable asset during trial, as it will need to stand up to a high level of scrutiny.
While business valuation is often a necessary step in resolving a commercial dispute, there is no universal framework for determining the value of a company. It is an art as well as a science, underscoring the importance of understanding your options and identifying the right approach to move forward with confidence and clarity.
At Hone Law, our knowledgeable commercial and business litigation lawyers possess in-depth technical expertise and robust skill sets that have been honed over years in the courtroom. We understand the importance of accurately capturing the value of your business and will leverage this information to favorably resolve your dispute.
What Information Does a Business Valuation Provide in a Commercial Dispute?
A commercial dispute business valuation must withstand a higher level of scrutiny compared to other valuations. This will be reflected in the data gathering, analysis, and reporting processes. For instance, a business valuation used in a commercial dispute must be documented to comply with court standards. All conclusions drawn from the valuation must be clear and concise, and the evaluation itself is generally more conservative to ensure airtight consistency.
The information provided by your commercial dispute business valuation may include the following:
- Statement of the company’s valuation range
- Basis of the estimated valuation range
- Supporting evidence, supplemental data, and assumptions that have been relied upon
- Methodologies adopted to assess the company’s value
- Discussions of the business analysis
As experienced commercial and business litigation lawyers, we complete business valuations in a consistent way with all current standards and court procedures, ensuring that all information is based on clear and reliable evidence. By accounting for potential complicating factors before reaching trial, we are prepared to address even the most nuanced challenges that can arise when presenting a business valuation in a litigation scenario.
What Are the Methods of Business Valuation?
There are no rigid guidelines when determining the value of a company. There are plenty of norms and accepted standards that apply, however, providing leeway when selecting a method of business valuation. Three of the most common valuation methods include:
- Market approach: Assesses a business based on the completed transactions and stock prices of comparable companies in the market.
- Income approach: Evaluates a business using historical earnings and projections of future cash flow, accounting for future capital needs and expenditures as well as differences in financing.
- Asset approach: Determines a company’s value by measuring the value of its assets against its liabilities. This approach is effective for companies that are asset-dependent, such as real estate- or IP-holding companies, or companies that are facing liquidation.
Business valuations are often used to measure damages in situations where a company’s value has been permanently impaired or diminished by another party’s wrongdoing. Historically, we have relied on business valuation in cases involving shareholder disputes, tax issues, business destruction, merger and acquisition, and defamation, to name a few. In other circumstances, it may be more appropriate to calculate lost profits to capture the damages to a company.
Can Damages Be Calculated Using Lost Profits?
Sometimes, it is more effective to calculate damages using lost profits. Lost profits can provide a clearer picture of damages to a business when the losses are confined to a limited time span. Lost profits are calculated based on the difference between projected cash flow and profits received due to the disputed matter.
Our commercial and business litigation lawyers typically use lost profits in breach of contract, intellectual property, and general commercial disputes. We will review your case, drawing upon several different techniques to calculate lost profits and maximize your settlement following a dispute.
Speak with an Experienced Commercial and Business Litigation Lawyer at Hone Law Today
If your company is facing a commercial dispute, determining the value of your business is key to preparing a successful settlement agreement and developing your trial strategy, if need be. Our commercial litigators bring a zealous, forward-thinking attitude to every business dispute. When possible, we will amicably negotiate via the settlement process; when necessary, we will roll our sleeves up and fight for your rights in trial.
Above all, we strive to advocate for your interests, resolve the disputed issues, and achieve the ideal outcome – all while causing the least amount of cost and disruption to your organization. We understand the importance of getting back to business. To learn more about how our team of experienced commercial and business litigation lawyers can help, consider contacting Hone Law at (702) 608-3720 today.