Shadow Adviser
Should you instruct a shadow adviser on a matrimonial business valuation?
Single Joint Expert
Typically, in matrimonial cases, a Single Joint Expert (SJE) is appointed to provide an independent valuation of the interests in a private company. The instructions may also include an opinion on maintainable earnings, capital extraction and possibly an assessment of any diminution in value. There is then an opportunity for the parties and their lawyers to raise any questions with the Single Joint Expert. Usually, questions have to be raised within ten days of receipt of the report. The parties and their instructing lawyers then need to consider the report and the implications for the negotiations.
Shadow Advisor
A shadow adviser assists a party confidentially to assess the expert report of another adviser. Their involvement is not normally disclosed to the other party. They are typically an expert who is experienced in acting as SJE but on this occasion acts as shadow adviser.
The timetable to review the report and to ask questions is short and we recommend approaching your prospective shadow adviser promptly to ensure they have time to assist your client. It may be helpful to line up your shadow expert ahead of receipt of the Single Joint Expert’s report.
Shadow adviser role in business valuation cases
When instructed as shadow adviser in respect of a business valuation we will consider the following points:
- Did the SJE request and receive sufficient information to reach a view on the valuation?
- Was the choice of valuation methodology reasonable? For example, was a valuation based on maintainable earnings appropriate or should it be net assets?
- What were the key assumptions made by the SJE and what was the impact of these on the valuation? For example, a small adjustment to the assessment of future maintainable earnings can have a significant impact after applying the multiple.
- Is the valuation opinion fair bearing in mind that valuation is inherently subjective?
A shadow adviser will also consider whether any opinion on maintainable earnings and liquidity are fair or whether there is an alternative view that should be explored.
The shadow adviser can then draft appropriate questions to explore any areas of subjectivity or where an alternative approach might be considered.
In our experience, the modest cost of a shadow adviser can be a worthwhile investment to ensure your client understands the SJE report, can raise appropriate questions to support their position and has peace of mind in knowing they have a second opinion.
Conclusion
In my experience a shadow adviser will ensure the client has peace of mind for the party and their adviser and in certain situations may provide valuable insight which may result in a change in the SJE’s opinion or allow the client to consider if appointing a party expert should be explored.
Getting in Touch
Fee estimates and CVs are readily available. Quotes can typically be provided within two working days.
Email: fiona@fhmforensic.co.uk
Telephone +44 (0)7770 642491
