We accept appointments as an independent expert to determine disputed business and share values and related financial matters, where the contract permits it and we have no conflict.
When is this valuation required?
- Articles or a shareholder agreement provide for an expert to fix the price of shares on a transfer.
- Completion accounts are disputed after a sale and the agreement refers the matter to an expert.
- An EBITDA or earn-out calculation is disputed.
- The parties agree, after a dispute arises, to refer a valuation to an expert.
Who instructs us?
- The parties jointly, under the contractual mechanism
- A nominated appointing body, where the contract provides for one
- Solicitors acting for each party
What exactly is valued?
Whatever the contract refers to the expert, and only that: the price of shares, the amount of a completion accounts adjustment, an EBITDA figure, a deferred or contingent consideration payment, or an accounting matter relevant to value.
How is value assessed?
The expert's authority comes from the contract, so the first step is to read it closely: what is referred, the basis of value, the procedure, whether the expert acts as an expert and not an arbitrator, and whether reasons must be given. We then agree a procedure with the parties, typically involving written submissions, responses and requests for information, and reach a decision using our own expertise.
How the approaches are usually weighed
Typical
- IncomeMaintainable earnings or discounted cash flowUsual starting point
- MarketComparable transactions and companiesCross-check
- AssetAdjusted net assetsWhere relevant
Expert determination, expert witness and arbitration
An expert witness gives evidence to a court or tribunal, which then decides. An expert determiner makes the decision. An arbitrator decides a dispute under the Arbitration Act 1996, with the procedural safeguards and rights of challenge that it provides. Expert determination is contractual: it is not arbitration, and the grounds for challenging a determination are generally narrow and depend on the contract. We do not treat these roles as interchangeable.
Matters commonly referred
Appointments typically arise under one of the following.
- Share valuation clauses in articles and shareholder agreements
- Completion accounts and purchase-price adjustment mechanisms
- Disputed EBITDA and earnings calculations
- Earn-outs and deferred consideration
- Accounting disagreements affecting value
Requesting an appointment
Send us the relevant clause and a short description of the parties and the issue. We will check for conflicts, confirm whether we are able to accept under the contract's terms, and propose terms of appointment, a procedure and a fee for the parties to agree.
What factors influence the result?
- Scope of authority
- The expert can decide only what the contract refers to them.
- Contractual definitions
- Agreed accounting policies, definitions of EBITDA or fair value.
- Procedure
- Submissions, information requests and whether meetings take place.
- Independence
- No relationship with either party that would compromise neutrality.
- Reasons
- Whether the contract requires a reasoned or unreasoned determination.
What information is required?
- The contract containing the expert determination clause
- Each party's submissions and supporting documents
- Accounts, completion statements or calculations in dispute
- Responses to the expert's information requests
We send a tailored information request once the scope is agreed.
What report will you receive?
We issue a written determination in the form the contract requires. Where reasons are required or agreed, the determination explains how each disputed item was decided.
See types of business valuation reports for how the scope of each type differs.
Timing and cost
How long will it take?
Some contracts set a deadline for the determination. Otherwise we propose a timetable in the terms of appointment for the parties to agree.
How much does it cost?
The contract often specifies how the expert's fees are shared, and the expert may have discretion to allocate them. Fees are agreed in the terms of appointment before work begins.
How our fees are set →Frequently asked questions
What is expert determination?
A contractual process in which the parties agree that an independent expert will decide a specific issue, such as a share price or a completion accounts figure, and that the decision will bind them to the extent the contract provides.
Is expert determination the same as arbitration?
No. Arbitration is governed by the Arbitration Act 1996 and has its own procedure and rights of challenge. Expert determination is a contractual process, generally with narrower grounds of challenge.
Can an expert determination be appealed?
Generally only on limited grounds, which depend on the contract and the law, such as the expert answering the wrong question or departing materially from the instructions.
How are completion accounts disputes determined?
The expert reviews the disputed items against the accounting policies and definitions in the sale agreement, considers each party's submissions and decides each item within the scope of the referral.
Can you act if only one party contacts you?
We can discuss whether we are able to accept an appointment, but a determination requires an appointment made in accordance with the contract, usually by both parties or a nominated body.
