Essential Financial Documents to Gather During Divorce – Part 4

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.

Essential Financial Documents to Gather During Divorce – Part 3

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.

Essential Financial Documents to Gather During Divorce – Part 2

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.

Essential Financial Documents to Gather During Divorce – Part 1

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.

Evaluating Your Firm’s Margin

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.

Potential Forensic Services Resulting from Valuation Normalizing Adjustments

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.

Active vs. Passive Appreciation of Closely Held Companies

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 for Divorce

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.

What Is a “Level” of Value, and Why Does It Matter?

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.

Fair Market Value and the Nonexistent Marketability Discount for Controlling Interests

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.

Meet the Team – Timothy R. Lee, ASA

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.

2022 Family Law Team Conference Wrap-Up

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.

The Importance of Normalizing Financial Statements for a Business Valuation

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.

Importance of an Independent Informed Valuation

In contested cases where a business interest comprises a significant portion of a divorcing couple’s net worth, it is common for one or both parties to retain a business appraiser to value the business. Post-divorce, if only one spouse retains an interest in the business, all else equal, a higher business interest value typically implies the other party will receive a greater share of the remaining marital assets, as compared to a lower business interest value. As we will discuss in this article, the facts and circumstances of the business interest being valued may reasonably support various assumptions when comparing two valuation conclusions.

Valuing Stock Options of Start-up Companies: A Complex Issue in Marital Dissolutions

The valuation of stock options is a complex issue that divorcing parties may face during the determination and division of the marital estate. Designed as compensation to both reward past performance and retain employees in the future, these benefits can be difficult to value, particularly at a specific point in time for the purpose of marital dissolution. In this article, we walk through an example of how to value a not so simple stock option situation – one in a start-up company.

Meet the Team – David W. R. Harkins, CFA, ABV

In each “Meet the Team” segment, we highlight a different professional on our Family Law team. In this segment, we highlight David Harkins. David works in our Nashville office and is a member of the firm’s Litigation Services Support team.

Active vs. Passive Appreciation of Closely Held Companies

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.

Understand the Asset Approach in a Business Valuation

In previous posts, we wrote about the income and market approaches used in business valuations. This article presents a broad overview of the third approach, the asset approach. While each approach should be considered, the approach(es) ultimately relied upon will depend on the unique facts and circumstances of each situation.

Meet the Team – Z. Christopher Mercer, FASA, CFA, ABAR

In each “Meet the Team” segment, we highlight a different professional on our Family Law team. This segment we highlight Chris Mercer. Chris is the Chariman here at Mercer and is active in family law litigation and corporate valuation.