Credibility is King in War of the Experts
June 22, 2008 | Business Valuation, Legal Perspective
The typical “war of experts” was presented in Bussa v. Bussa, 2008 WL 2117138 (Mich.App.), a 2008 unpublished decision of the Michigan Court of Appeals. In this case, the business owner’s expert gave an opinion of value based upon the asset approach. The subject company (actually, companies) was a petroleum sub-jobber comprised of a gas station operator, a real estate holding company owning the gas stations, and a trucking company delivering fuel to the gas stations. The business owner’s expert relied on an net asset value approach and excluded the income approach because the company was involved in a highly volatile industry.
The wife’s expert considered all three approaches, including discounted cash flow, market comparables, and net asset value. In valuing the operating company, she relied primarily upon the market approach. For the trucking company, she considered all three approaches; and for the real estate holding company, the net asset approach was deemed most reliable.
The trial court rejected the opinion of the husband’s expert and slightly modified the value suggested by the wife’s expert, applying a 5% discount for lack of control (the business owner’s brother owned half of the stock) and a 10% key man discount. The opinion of the husband’s expert was rejected because of significant computational errors, an inability to cite data to support his views, and an impression of advocacy for his client.
On appeal, the Michigan court affirmed, finding that it was mostly an issue of credibility, which is best left to the trial courts to decide. It is perhaps notable that the business owner on appeal seemed to contradict his own expert, arguing that his businesses should be valued at their liquidation value (contrary to his expert’s testimony) and criticizing the discounts that were applied to the value rendered by wife’s expert (which were the discounts to which husband’s own expert testified).