We are nearing trial in a case where the value of a business is at issue. While in many cases, my personal preference would be to have my own expert, as opposed to a joint expert, in this case, because of the nature of the business and for a few other reasons, including cost, we suggested using a joint expert. The other side refused as is there right.
That said, we insisted upon a simultaneous exchange of the expert reports. My experience has been that when one party submits a report and the other side gets to reply, there tends to be a cherry picking of the subjective aspects of the report that the like or favor them, and then go either higher or lower, as the case may be depending upon who they are representing. For instance, while that expert on their own may have come to a different reasonable compensation (replacement compensation) or capitalization rate, two of the subjective areas impacting a business valuation determination, if they have other report, you don’t often don’t see them going higher or lower as the case may be, if that would negatively impact the value that their client might prefer. In another recent case, the adverse expert’s report only noted in his report errors made by the other expert that reduced value – conveniently failing to point out the other errors that would increase value – something conceded when I took his deposition.
Getting back to this case I was speaking of above, a funny thing happened. The business owner’s expert’s capitalization rate was lower than the non-business owner’s expert (the lower the cap rate, the higher the value and vice versa). In addition, one expert essentially double counted something, which can be easily corrected, and when it is, the expert’s respective opinions should be reasonably close. Now there are still certain subjective assumptions where the experts were not unexpectedly more or less than the other. In the big picture, the change in value related to these adjustments are largely immaterial.
In short, the simultaneous exchange of the reports essentially kept both experts from going to far out on a limb. This will hopefully lead to a fair resolution because the actual spread in their opinions is not that great. Maybe that is the way it is supposed to be.