When should you use an expert determination to resolve a dispute over the value of a business between buyer and seller?


It’s the scenario as old as time itself; the buyer wants the lowest price, and the seller wants the highest price. 

So how does this play out when dealing with a business sale? 

One would assume the completion accounts would paint a clear picture to support the business valuation.  

However, even with the most thorough bookkeeping and transparent records, the buyer and seller may have a difference of opinion on the accounting treatment for various items even after careful negotiations and detailed documentation.  It is not surprising, considering that accounting will always include some estimates and valuations will be based on assumptions about the future prospects. 

With both parties having different perspectives, it can cause stalemate over settling the completion accounts and earn outs. 

How do you resolve a stalemate over the completion accounts and earn-outs?

If the stalemate arises due to differences of opinion about the valuation of various items in the completion accounts or earn-out calculation then most SPAs will require the appointment of an expert to decide on the correct treatment of the disputed items.  Occasionally there are only one or two items that require an expert’s opinion, but we have dealt with cases where there have been dozens of items that needed a decision. 

For a party’s peace of mind and certainty, most expert determinations require the expert to explain the reason for his decision, and these decisions can only be challenged if there is manifest error.

Having an expert determination allows a stalled dispute to be resolved quickly and cost-effectively thanks to an independent, technical expert reviewing the dispute with an independent frame of mind, and allowing both parties to move forward.  

To find out more about expert determination, please click here and I’d be happy to have a ‘commitment free’ discussion about your issue. 


Charles Lazarevic

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