We’ve recently undertaken a number of business valuations for family businesses which are the subject of divorce proceedings. The great thing to see is that most of them have been amicable, calm and sensible arrangements between the parties. Some issues:
Incremental movements in the value of the business will by nature adversely affect one side and benefit the other. We provide the ‘umpires decision’.
Often only one party works in the business and the other knows little or nothing about the day-to-day running of the business. For us it’s absolutely critical that an unbiased view of the business is offered and that means ensuring the inactive party gives a ‘reality check’ over the information provided, especially the more fluid commentary like the business’s competitive position and the outlook for the future.
The accountant who has been advising the business cannot be independent because they’ve been advising both parties.
Tumultuous times at home can result in bad karma at the office. This can affect recent business results but could also mean that selling the business seems like an easy way out. We advise one step at a time because, as we’ve said here before, selling a business is hard work and could create more problems than it fixes.
What if the children work in the business? We’re obliged to treat them as any employee and ensure that commercially realistic salary and benefits are accounted for.
It makes sense to have agreement between couples on how a business and its value will be handled long before things go pear shaped. If you were going into business with a partner you’d draw up a partnership or shareholder’s agreement wouldn’t you? Same here. Agreements between husband and wife in the cold hard light of day won’t stop a divorce in future years but it will make things easier to unravel.
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