I have been asked to speak at the 2025 AICPA Annual Business Valuation and Forensic Accounting Conference about preparing rebuttal business valuation reports. The audience will undoubtedly be primarily comprised of fellow credentialed business valuation professionals, but the topic is so important, I thought it is worthwhile to write this blog post for our attorney subscribers.
In business litigation, few tools are as powerful—and as misunderstood—as the rebuttal business valuation report. Unlike an original valuation, a rebuttal is not a second opinion of value. Its mission is to interrogate the opposing expert’s conclusion and determine whether it rests on sufficient facts, reliable principles, and a sound application of those principles. When executed properly, a rebuttal can dramatically influence the outcome of a case by demonstrating material errors that undermine an opposing expert’s credibility.
A rebuttal report is not an invitation to revalue the company. Instead, it stays within the “lanes” the opposing expert has created. The objective is to test whether the other side has honored the governing standard of value, the proper level of value, and the valuation date, and whether the inputs and methods are both reliable and replicable. Only when the flaws are so pervasive that a value range or corrected conclusion becomes necessary should a rebuttal go beyond a critique. In most cases, a rebuttal that is tightly focused, standards-compliant, and clear is more persuasive to judges and juries than an expansive alternative valuation.
Professional Standards
Professional standards supply the framework that gives a rebuttal its credibility. AICPA Statement on Standards for Valuation Services No. 1 (VS §100) governs members who perform valuation services, whether issuing a full valuation engagement, a calculation engagement, or a critique without a value conclusion. Even in a critique-only report, VS §100.60–.64 requires proper scope, documentation, and reporting.
Similarly, NACVA Practice Standards reinforce the need for objectivity, complete disclosure, and a report that another professional could replicate. USPAP’s Ethics and Record Keeping Rules strengthen that foundation. The Ethics Rule demands integrity, independence, and objectivity, while the Record Keeping Rule requires a complete workpaper file sufficient for reconstruction—principles that bolster a rebuttal’s credibility even when USPAP is not mandated.
When the standard of value is fair market value, IRS Revenue Ruling 59-60 provides additional guidance. Courts often rely on its eight factors, ranging from the company’s history and economic outlook to earnings capacity and goodwill, and a rebuttal should call out where the opposing expert has ignored or misapplied these considerations.
Building the Rebuttal: A Work Program
A disciplined rebuttal follows a logical sequence. First, it locks down the legal framework: the standard of value, level of value (control versus minority; marketable versus non-marketable), valuation date, and any jurisdictional limits on hindsight. Missteps here can taint an entire analysis.
Next, the expert reconstructs the opposing expert’s logic. By organizing the report into its basic components: inputs, valuation methods, normalization adjustments, and conclusion, gaps quickly emerge. For example, an opposing report might build a terminal value on EBITDA while discounting the firm’s free cash flow or apply control-level adjustments while relying on minority-level market multiples.
Every key input must then be tied to specific, verifiable sources: audited financial statements, management budgets, customer contracts, or independent industry data; creating an evidence map that can withstand discovery and cross-examination.
The expert then screens for materiality. Each correction is modeled and ranked by its effect on value, so that only the issues that move the needle drive the executive summary and testimony. Pedantic disagreements fall to footnotes or appendices.
Finally, the rebuttal is written for its ultimate audience: a judge or jury. The strongest reports open with a concise executive summary of three to five material defects, each accompanied by a clear statement of the value impact. They proceed issue by issue; describing what was done, explaining why it violates professional standards or the evidence, and quantifying the correction before closing with a conclusion that distills the message to its essence: as corrected, value is materially different.
Common Valuation Flaws
Certain flaws appear again and again in valuation reports and offer fertile ground for rebuttal. Forecasts may be overly optimistic, with revenue growth unsupported by operational realities, capital expenditures understated relative to depreciation, or negative working capital turns assumed to persist indefinitely. Terminal values may rest on growth rates that exceed long-run nominal GDP or may apply growth to EBITDA when discounting free cash flow, ignoring the reinvestment required to sustain that growth.
Cost of capital analyses often reveal stale market data, betas chosen without testing stability, or risk premia, such as a company-specific risk premium and a size premium’ stacked in a way that double counts risk. Market approaches may rely on guideline public companies or transactions that differ materially in business model, scale, or geography, or may blend medians and means without a rationale. And level-of-value errors are surprisingly common, such as adding a control premium to already control-level multiples or applying a discount for lack of marketability at the wrong stage of analysis.
Litigation Strategy in Court
A rebuttal must also be strategically integrated into the litigation process. Coordination with counsel is essential to meet disclosure and timing requirements. Exhibits should be designed for clarity and brevity: side-by-side tables that compare opposing inputs with corrected inputs and quantify the percentage change in value, as well as one-page waterfall charts that aggregate the top corrections, help judges and juries grasp complex financial concepts quickly.
In preparing for testimony, every key point should be distilled into a three-step narrative: what the opposing expert did, why it is unreliable under recognized standards and evidence, and how value changes when corrected. Anticipating cross-examination is equally important. A well-prepared expert can answer concisely when challenged on assumptions, sources, or judgment, and can anchor those answers in recognized authorities like AICPA VS §100 or USPAP.
Consider a recent shareholder dispute. The opposing expert assumed a six percent terminal growth rate, well above long-run nominal GDP, and stacked a control premium onto market multiples already at a control level. By carefully reconstructing the opposing logic and quantifying each correction, our team demonstrated that these two errors alone reduced the indicated value by roughly thirty-five percent. The court highlighted the “clear and replicable” rebuttal in limiting the weight of the opposing testimony, reshaping settlement dynamics.
Takeaways
The most effective rebuttals begin early. Retaining a valuation expert during discovery enables counsel to tailor document requests, identify key financial data, and anticipate opposing theories. Early engagement allows time to build the evidence map, run materiality screens, and prepare exhibits that will stand up in a federal courtroom.
Rebuttal reports are not about out-valuing the other side but about discipline, quantification, and clarity. They adhere to professional standards, document every step, and communicate in plain language so that a judge can follow the logic and replicate the results. Engaging a qualified valuation professional early can mean the difference between a rebuttal that merely questions an opinion and one that decisively reshapes a case.
In need of a rebuttal report for your case? Call our office: 646-661-3800 ext. 117.