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Honeywell, best known for its thermostats, also produces specialized chemicals used in semiconductor manufacturing. In an alliance, Honeywell supplied the chemicals, and Air Products handled sales and customer relationships. Air Products agreed to buy all its semiconductor chemical needs from Honeywell and share the profits. When Air Products later purchased a competing chemical business and stopped buying from Honeywell, Honeywell claimed breach of contract and sued for lost profits. I’m not a lawyer, so I will avoid the nuances of this case. Despite the case being 20 years old, I wanted to highlight the use of two different financial experts: the CPA/economic damages analyst vs. the economist. Honeywell’s Expert (CPA, Economic Damages Analyst) The CPA, specializing in economic damages analysis, built a detailed cost accounting model separating fixed from variable costs to determine incremental profitability. He estimated that every dollar of lost sales would have generated roughly 48% profit and projected damages of about $10.8 million under the assumption that Honeywell would lose all alliance sales once Air Products left. Air Products’ Expert (Economist) The economist used regression analyses and three other statistical methods to estimate profit margins, averaging the results to an 11% profit rate. His damages estimate came in under $1 million. His primary criticism was that the accountant’s approach relied too heavily on internal assumptions and was overly optimistic. The judge found the CPA’s analysis more grounded in business operations but slightly too optimistic. The economist’s model, though “mathematically neat,” was disconnected from how the business really […]

Due to the One Big Beautiful Bill (OBBB), beginning January 1, 2026, the lifetime exemption amounts for gift and estate taxes increase to $15 million per person. For married couples, that effectively means $30 million can be transferred without federal gift/estate tax. Unlike the temporary increases under the 2017 Tax Cuts and Jobs Act (TCJA), the OBBBA makes this increase permanent, unless changed by future legislation. The valuation of an estate is not a mechanical exercise; it is a nuanced process that can significantly impact the amount of tax owed. For high-net-worth families, estates often contain complex assets beyond cash and publicly traded securities. These may include operating businesses, family limited partnerships, hedge fund or private equity interests, commercial real estate, intellectual property, or other illiquid holdings. The valuation of an estate is not a mechanical exercise; it is a nuanced process that can significantly impact the amount of tax owed. For high-net-worth families, estates often contain complex assets beyond cash and publicly traded securities. These may include operating businesses, family limited partnerships, hedge fund or private equity interests, commercial real estate, intellectual property, or other illiquid holdings. Key valuation considerations include: Marketability Discounts: Interests in privately held businesses or partnerships are generally less liquid than publicly traded stocks. Applying appropriate discounts for lack of marketability (DLOM) can materially reduce the reported value of these interests. Control Premiums or Discounts: The level of control associated with a business interest, whether majority, minority, or non-controlling, directly affects value. Recognizing and justifying these […]

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 […]

Information presented on a company’s financial statements may not always be meaningful from a valuation perspective – even if it follows Generally Accepted Accounting Principles (GAAP). Whether financial information is obtained from business income tax returns or audited financial records, valuation experts often make adjustments to get a clearer picture of a company’s financial position, market risk, and ability to generate cash flow in the future. Sometimes, these adjustments may be due to the business owner’s nefarious actions. In other cases, they may be due to elections in accounting methodology or procedures. Although these adjustments vary from case to case, many fall into one or more of the following types when valuing a business interest. Nonstandard accounting practices Extraordinary or nonrecurring items Hidden assets or liabilities, and/or Discretionary spending Nonstandard Accounting Practices A valuation expert may estimate value by using pricing multiples derived from comparable private and public transactions (the market approach) and discount rates derived from returns on public company stocks (the income approach). Thus, if the subject company deviates from how other companies in its industry typically report transactions, the valuator may need to make adjustments. Certain financial reporting practices may require adjustments if the subject company’s methods differ from industry norms. Examples include differences in inventory, depreciation, or revenue recognition methods. For example, if a company reports inventory using the last-in, first-out method (LIFO) but other companies in its industry typically use the first-in, first-out (FIFO) method, an adjustment may be needed to normalize the subject company’s […]

On March 26, 2025, the Appellate Division, Second Department issued its decision in Torkin v. Susac, a matrimonial case involving complex issues of equitable distribution, post-divorce maintenance, and the treatment of trust assets.¹ The court largely affirmed the rulings of the trial court, which had divided significant marital property and awarded substantial ongoing maintenance to the non-monied spouse. Background Michael Torkin and Heather Susac were married in 2001 and had two children together. After pursuing an unsuccessful collaborative divorce process, the couple formalized a series of agreements in 2016, including a “Stop-the-Clock Agreement” that fixed the valuation date for marital assets as December 31, 2016. Torkin commenced the divorce action nearly a year later, in December 2017. The trial court entered an amended judgment of divorce in December 2021 that addressed multiple disputes over property classification and support. Both parties appealed. Timeline Key Rulings Equitable Distribution of Law Firm Partnership Interest One major issue was the equitable distribution of Torkin’s partnership interest in Sullivan & Cromwell LLP. The trial court awarded Susac a 37% interest in that asset, based in part on her indirect contributions as a homemaker and caregiver during the marriage. The appellate court upheld this determination, citing established precedent that permits courts to consider non-financial contributions in distributing career-based marital assets.² Trust Assets: Commingling Converts to Marital Property The court affirmed that the Michael H. Torkin 2014 Trust was marital property subject to equal distribution. Although Torkin asserted it was separate property, the court found that he […]

In divorce proceedings involving a privately owned business, three recurring questions often drive the financial strategy: What is the business actually worth? How does business value intersect with spousal support? Is the business owner misrepresenting income or assets? Each of these issues implicates discovery scope, valuation methodology, and litigation risk. Attorneys who identify and address them early gain strategic leverage, whether in settlement negotiations or courtroom proceedings. Issue #1: What Is the Business Actually Worth? Valuation experts generally apply one or more of the three accepted approaches: Asset Approach: Net asset value based on the fair market value of the business’s underlying assets and liabilities. Market Approach: Comparison to similar businesses sold under comparable conditions. Income Approach: Present value of anticipated economic benefits, typically based on historical and/or projected earnings. These methodologies are grounded in an analysis of the company’s financial records, but accurate results require more than just tax returns and financial statements. We frequently encounter cases where the non-owner spouse lacks access to meaningful operational data. When the expert is deprived of: Site visits, Management interviews, or Internal financial records (e.g., general ledger, merchant accounts, POS systems), There’s a risk of misvaluing the business. One case involved a restaurant owner who maintained two sets of books – only a subpoena of raw POS data revealed the true sales. If the business was established prior to the marriage, courts may focus on marital appreciation rather than total value. Estimating appreciation requires: A reliable value at the date of marriage, […]

You’re representing a client in a fraudulent transfer case, and opposing counsel starts throwing around terms like “insolvent” and “liquidity crisis.” Are they talking about the same thing? Should you be worried about both? Solvency and liquidity may sound like accounting jargon that means roughly the same thing, but confusing them in litigation can lead to costly consequences, so I wanted to break it down simply: Solvency addresses the big picture question: Can this company survive long-term? Do its assets actually outweigh its debts? Think of it as asking whether someone could theoretically pay off everything they owe if they had to liquidate, or the ability to pay both current and non-current liabilities. Liquidity is more immediate: Can this company pay its bills right now? It is the ability to meet just the current liabilities of the company. You might own a million-dollar building, but if you can’t make payroll next week, you have a liquidity problem. Consider solvency as the ability to fulfill long-term financial obligations, while liquidity looks at short-term commitments. I’ve worked on cases where a company looked solid on paper but couldn’t scrape together enough cash to keep operating. That distinction matters enormously in court. The Solvency Opinion Judges want more than assertions when financial health becomes central to litigation, whether in bankruptcy disputes, fraudulent conveyance claims, or contested transactions. They want a solvency opinion from a qualified expert. A proper solvency analysis requires three separate tests. A company must pass all three to be deemed […]

What happens when legacy, loyalty, and litigation collide? For attorneys representing family-owned businesses, the valuation process often uncovers more than just numbers. From off-the-books perks to underpaid relatives, these enterprises can present complex, fact-intensive scenarios that demand forensic scrutiny. With family enterprises representing more than 60% of privately held companies in the U.S., their valuation is often a pivotal issue in disputes over divorce, shareholder oppression, tax compliance, or succession planning. Yet their informal management style and personal entanglements can complicate even the most fundamental assumptions behind fair market value. As business valuation and forensic accounting professionals, we’ve routinely encountered four recurring challenges that attorneys should consider when engaging experts in these cases. 1. Related-Party Compensation: Is Payroll Inflated or Distorted? In family-run businesses, payroll often serves dual roles: compensation and succession planning. Nepotism may skew hiring decisions, and salaries may not reflect market rates or job responsibilities. In litigation, this matters. For example, in a shareholder dispute involving a second-generation manufacturing company, our analysis showed that two family members employed in non-operational roles received six-figure salaries and luxury vehicle stipends. We normalized these expenses to reflect what a third-party buyer would pay in a true arm’s-length scenario, resulting in a material adjustment to the company’s earnings base.[1] Practical Considerations: Does the family member have qualifications commensurate with their pay? Are perks such as country club dues, personal travel, or under-reported cash compensation distorting EBITDA? Is there documentation or only verbal justification for compensation decisions? Valuation Impact: Adjustments are often […]

Gossip rags and the New York Times alike have been covering the lawsuits exchanged between It Ends With Us co-stars Blake Lively and Justin Baldoni (along with Wayfarer Studios and others). Lively claims Baldoni et al. orchestrated a retaliatory smear campaign against her after she raised concerns about a hostile work environment, including allegations of sexual harassment and misconduct on the set of It Ends With Us. The lawsuit alleges that Baldoni and his team engaged in “social manipulation” tactics, including planting negative stories, suppressing allegations against him, and attempting to destroy Lively’s reputation through a coordinated digital and media attack. (Baldoni and team have brought action of their own against Lively and her husband, Ryan Reynolds. Counsel has thrown a $400 million dart at a wall, seeking primarily punitive damages.) Fame has economic value. Although Lively has several business ventures of her own, when you are dealing with a celebrity of that caliber, her Lively-hood operates much like a business. Among other things, Lively is seeking: [A] money judgment representing compensatory damages including consequential damages, lost wages, earnings, and all other sums of money, together with interest. I wanted to take a closer look at the compensatory damages the Lively team has posed in their Prayer for Relief and provide insight into what they may recover with the right economic damages expert. Fair Market Value – Which Approach for Reputational Damages? Much like valuing a business, in a case like this, we can compute the fair market value of […]

The Super Bowl is an annual event that both avid sports fans and the indifferent have come to enjoy. There seems to be something for everyone. Pomp and circumstance over the year’s two best football teams battling for the Lombardi Trophy, the halftime show, and the commercials. But for many like me, the crowning of football’s best means just one thing: pitchers and catchers are about to report for spring training. Experts are supposed to be unbiased and transparent. So, before you continue reading, let me come clean. I’m a big baseball fan who bleeds the Mets blue and orange. I am not a season ticket holder, but I watch nearly every game. My favorite summer moments are taking the 7 Train from Midtown to Flushing, buying a single ticket the day of the game, and sitting in the stands as close to the field as possible, with my tie loosely around my collar and suit jacket on my lap. Not since acquiring Mike Piazza has there been so much pre-season buzz about the Mets. Signing Juan Soto to a multi-year contract for a king’s ransom has certainly set great expectations. But the past few months after the Soto signing has been all about the Pete Alonso contract negotiations. Who didn’t want the Polar Bear back in a Mets uniform? He is just a stone’s throw away from passing Daryl Strawberry for the most home runs by a Met. And who can forget the winning homerun dumped over the right-field […]