News
Business Valuation on Divorce
On divorce, the valuation of a family business is often a highly emotional
and contentious issue, so it was unsurprising when the divorce of a couple
after 15 years of marriage led to an acrimonious dispute over the value
of their successful restaurant business.
The ex-husband valued the total assets (including the business, which he had
run for 33 years) at £4.2 million. His ex-wife placed a valuation on the
assets of £7.6 million, valuing the business at £5.3 million. She
sought 50 per cent of the net assets plus school fees for the children. Her ex-husband
offered 42 per cent of the net assets (£1.7 million), although this offer
was later reduced.
Both produced expert witnesses to back up their respective valuations of the
business, which was the main point of dissent. The experts differed, but the
main point of contention was whether the valuation should be based on a multiple
of six times ‘maintainable earnings’ or nine times.
The judge relied on evidence of transactions in similar circumstances and ruled
that the multiplier should be 6.5. He commented that the valuations of experts
were of ‘doubtful utility’ because they are a matter of opinion and
experts’ opinions differ. He therefore adopted a broad brush approach.
Since there were insufficient resources for a ‘clean break’ arrangement
to be financed, he ordered that the wife should receive £1.45 million plus
periodical payments of £60,000 annually, child maintenance of £20,000
per annum and the cost of the school fees.
