I was involved in a case where there was a compulsory acquisition of a business, but there was a discrepancy regarding the true value of the business.
So, the purchasing party was seeking compensation for what they felt had been an inflated valuation of the sale price.
The purchased business was a skip hire company, that had been compulsorily purchased for the acquisition of the land.
However, when this business was valued to determine the sale price, the skip hire company claimed that along with providing skip waste removal, they were performing a recycling services.
This simple word, ‘recycling’, completely changed the value of this business in the judge’s mind.Read more: How semantics can impact a business valuation and create a grey area for an anticipated judgment.
In the current economic climate, having a waste business that performs recycling services is categorised as much more valuable than a skip hire waste business alone.
I was engaged by the purchasing party who were required to pay compensation, and they didn’t feel the business being described as a recycling business was a fair representation of their primary operations.
It was the purchaser’s opinion that the recycling services were minimal.
My job was to demonstrate to the court that the term ‘recycling’ had been used generously and that it should not have inflated the value of the business.
As such, the purchasing party was seeking the court’s acceptance for the difference in what they felt was the true value of the business which they felt was primarily a skip waste removal company (much less valuable than a recycling business).
In this situation, the case ended up in court and the judge sided with the skip company, in agreeing that their recycling services justified the improved business value.
This case just goes to show that despite the best efforts to offer irrefutable financial evidence to the court, at the end of the day, it comes down to the determination of the judge, and that the final judgment can never be presumed.
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