Valuation & Litigation Advisory Blog

This month's issue of Valuation & Litigation Advisory Insights includes the following articles:

• Active vs. passive appreciation: A deceptively complex issue in divorce cases
• Before and after: Court paints picture of lost profits and other calculations
• It’s not that easy: Determining how costs affect lost profits

Active vs. Passive Appreciation: A Deceptively Complex Issue in Divorce Cases

In divorce cases, it’s common for an interest in a closely-held business or professional practice to be the marital estate’s most valuable asset. In many states, when the owner-spouse brings this asset to the marriage, a business valuation expert may be called upon to distinguish between active appreciation in the business’s value (which is subject to division) and passive appreciation (which is not). This article explains how, after determining passive vs. active appreciation, the valuation expert might then decide how much an owner-spouse is responsible for the latter.

Before and After: Court Paints Picture of Lost Profits and Other Calculations

In Floorgraphics Inc. v. News America Marketing In-Store Services Inc., the U.S. District Court for the District of New Jersey provided valuable insight into the "before-and-after" method, guideline company use, and marketability discount availability. This article discusses the ins and outs of the case, noting the importance of demonstrating in court that financial experts’ methods are reliable in order to better defend them against attacks on their reliability in the form of Daubert challenges.

It’s Not That Easy: Determining How Costs Affect Lost Profits

Lost profits are a common measure of damages in commercial litigation, and in many cases, they’re the only form of recovery that can truly make a plaintiff whole. Establishing the amount of lost profits requires the parties to estimate what the plaintiff would have earned but for the defendant’s alleged misconduct. This article takes a look at a hypothetical example of how lost profits can be determined.

Prior issues are available in the E-Newsletter Archive of our Valuation & Litigation Advisory Services Resource Center. If you would like to subscribe to this free, monthly, business valuation and litigation support e-newsletter, send an email to info@skodaminotti.com.

If you have any questions about any of these articles, post a comment below or please contact our Valuation & Litigation Advisory Services Group at 440-449-6800.