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Valuation: the disputes

We often value businesses and intangible assets in disputes, and in reviewing the work of other valuers. Often we are surprised at the methods that we see applied and more specifically the valuation evidence that has been ignored.

Where should a valuer start when faced with these? Should they open Excel and get to work with a discounted cash flow analysis? Should they crack on with searching for comparable companies? The valuer should normally start much closer to home with a review of any available information on transactions in the asset which is the subject of the valuation.

Value is often understood as the sum of money that is be exchanged for an asset between a buyer and seller. In those cases, it follows naturally that the prices agreed between actual buyers and sellers in transactions in the subject asset are likely to provide relevant valuation evidence, and perhaps the most reliable available. This is because such transactions reflect actual buyers’ and sellers’ assessments of the future benefits of holding the asset, and the uncertainty in those assessments.