Divorce is often an emotionally and financially draining process, and estate planning may be the last thing on the minds of the divorcing parties. However, reviewing estate plans during a divorce can be a step in preparing for the future. Like many aspects of divorce, timing matters and there are both advantages and drawbacks to updating your estate documents while the divorce is still pending.
In this article we explore how fund principals in private equity, venture capital, and hedge funds earn a share of profits—known as carried interest—when performance exceeds benchmarks. The article breaks down fund structures, highlights valuation challenges, and emphasizes the need for experienced appraisers to navigate the complexities involved in assessing these interests.
This article discusses important concepts of personal vs. enterprise goodwill in valuations for divorce. It is important to understand the business, industry, and efforts of the divorcing spouse(s) & non-divorcing parties to perform a thorough, supportable analysis. It is also important to know how each state treats personal goodwill – some states consider personal goodwill to be a separate asset, and some do not make a specific distinction for it and include it in the marital assets. Additionally, while there are several accepted methodologies for determining % allocations to personal vs. enterprise, there are not uniform standards nor guidelines that govern the how-to’s; as such these analyses are complex and require subject matter expertise.
So, how does a business owner evaluate their business? And how can advisers or formal business valuations assist owners examining their businesses? There are at least six ways and they are important, regardless of the size of the business. All six of these should be contemplated within a formal business valuation.
As the holiday season is upon us, and with Thanksgiving around the corner, I would be remiss not to reflect and share highlights from a bustling fall season at Mercer Capital. We are very grateful and thankful for the experiences, opportunities, and interactions with many of you!
Chris Mercer reviewed the Supreme Court’s Connelly v. United States decision, which ruled that life insurance received by a company after a shareholder’s death increases the company’s value for tax purposes. This ruling has important implications for divorce valuations, where accurately assessing business assets, including life insurance proceeds, is crucial.
For business owners navigating a divorce, the value of a family business and its associated real estate can significantly impact the division of marital assets. Real estate strategies vary widely—from owning operating real estate to leasing from third or related parties—and each approach offers different implications for risk, capital appreciation, and business flexibility. Understanding these strategies can help couples make informed decisions about their marital estate during a divorce.
This article discusses important concepts of personal vs. enterprise goodwill in valuations for divorce. It is important to understand the business, industry, and efforts of the divorcing spouse(s) & non-divorcing parties to perform a thorough, supportable analysis. It is also important to know how each state treats personal goodwill – some states consider personal goodwill to be a separate asset, and some do not make a specific distinction for it and include it in the marital assets. Additionally, while there are several accepted methodologies for determining % allocations to personal vs. enterprise, there are not uniform standards nor guidelines that govern the how-to’s; as such these analyses are complex and require subject matter expertise.
We were proud to sponsor and attend the AAML’s inaugural National Family Law Conference in Nashville, Tennessee on May 16-18, 2024. As usual, the sessions and attendees did not disappoint. Our biggest takeaway was that successful cases include the right recipe: the right attorney and the right expert – essentially, the right team. In this article we discuss some of our takeaways from this years AAML Family Law Conference.
Previously in this series, we discussed the importance of hiring an expert and the documents needed to prepare the marital balance sheet, analyze support and need in a Lifestyle Analysis (aka Pay & Need Analysis), and perform a business valuation. This month, we conclude our series with the documents needed for other forensics services and valuation services. In this post, we discuss documents for arithmetic determinations of separate vs. marital, active vs. passive, and asset tracing. The appraiser/financial expert does not render legal opinions, though, assists with quantifying complex financial issues, while being aware of statutory and case law in varying jurisdictions.
In Parts 1 and 2 of this series, we discussed the importance of hiring an expert and the documents needed to prepare the marital balance sheet and analyzing support and need in a Lifestyle Analysis.
This month, we discuss the documents needed for performing a business valuation, the core competency of Mercer Capital.
There are many unique considerations and complexities to business valuation in divorce, often requiring more documentation and analyses. This includes personal goodwill, owner/operator compensation for valuation and income division purposes, formula clauses in Buy-Sell Agreements, and active vs passive, among others.
In Part 1 of this series, we discussed the importance of hiring an expert and the documents needed to prepare the marital balance sheet including tax returns and a personal financial statement. In Part 2 we discuss the documents needed for analyzing support and need, otherwise known as a Lifestyle Analysis or a Pay and Need Analysis.
In prior posts, we have written about the benefits of hiring an expert in family law cases, whether it’s expected to settle or go to trial. In part 1 of this 3 part series, we provide you with a resource that will assist you and your clients during one of the most difficult times in their lives, divorce. We have compiled a list of financial documents that are typically needed in the divorce process and decoded common financial terms helpful to attorneys and their clients.
An RIA’s margin is a simple, easily observable figure that condenses a range of underlying considerations about a firm that are more difficult to measure. As much as a single metric can, margins reflect the health of a firm—indicating whether a firm has the right people in the right roles, whether it’s charging enough for services, whether it has enough (but not too much) overhead, and much more. But when assessing your firm’s margins, it’s important to consider the context of the firm’s ownership and compensation structure and also the tradeoffs associated with margins that are too high or too low.
This is the second of a two-part series where we focus on navigating business valuation complexities in litigation. In this article we discuss multiple valuation dates and opposing expert reports.
In this article we explore the necessity for detailed forensic investigation to uncover any concealed financial strategies or irregularities that may be deployed in anticipation of a divorce. The stakes are high, and the methods can be intricate, hence the essential role played by financial experts in ensuring accuracy and fairness in the equitable distribution of marital assets.
Determining the value and classification of financial assets can be challenging during a divorce proceeding. The value of a couple’s closely held business could be the most valuable asset in the marital estate. If the business was owned prior to marriage, the identification and quantification of any appreciation as active or passive could be critical to the overall marital value placed on that asset.
Valuation of a business can be a complex process requiring accredited business valuation professionals. Valuations of a closely held business in the context of a divorce are typically multifaceted. Business valuations are a vital element of the marital dissolution process as the value of a business, or interests in a business, impact the marital balance sheet and the subsequent allocation/distribution of marital assets. In this article, we introduce the three valuation approaches and discuss the importance of normalizing adjustments to the subject company’s income statement.
Business owners and their professional advisors are occasionally perplexed by the fact that their shares can have more than one value. This multiplicity of values is not a conjuring trick on the part of business valuation experts, but simply reflects the economic fact that different markets, different investors, and different expectations necessarily lead to different values. Business valuation experts use the term “level of value” to refer to these differing perspectives.
This article discusses the concept of fair market value and its various effects. First, we explain what fair market value means. Then, we explore the hypothetical negotiations between potential buyers and sellers when determining fair market value and the implications of these discussions.
Finally, we examine the impact on the so-called “marketability discount for controlling interests” by analyzing this “discount” from three perspectives: the meaning of fair market value, the integrated theory of business valuation, and the recurring and incorrect rationales for this discount.
In each “Meet the Team” segment, we highlight a different professional on our Family Law team. This segment we highlight Timothy Lee. Tim is the Managing Director here at Mercer and is a member of the firm’s board of directors.
To celebrate a new year and everything that comes with new beginnings, the Mercer Capital Litigation Support Services Team has decided to start the year with a blog emphasizing the importance of the beginning of a family law engagement, defining the assignment.
In-person conferences are back in 2022 and so are we. Our professionals have been speaking at and attending numerous conferences, so we thought it a good idea to reflect on a few of these conferences and share selected PowerPoint decks with you. Why? Because there are valuable materials on valuation, forensic and financial topics included in these PowerPoint decks.
What is normal? A question we seem to have been asking ourselves for the last few years. When it comes to making sense of the “normal” in this new day and age, we cannot offer any advice there. But we can speak on the process and importance of normalizing financial statements for a business valuation.