When Different Values Hold Up a Settlement
A business may be one of the largest assets involved in a separation, yet its value can be difficult to agree on. Strong earnings and established customers may suggest substantial value, while debt, uncertain contracts, and reliance on the owner’s ongoing work may complicate the assessment. A significant difference between valuations can delay property negotiations. Resolving that difference starts with understanding what each figure represents, which information supports it, and why the conclusions differ.
What Is Being Valued, and at What Date?
The value of an entire business is not necessarily the value of one person’s interest in it. Share ownership, the rights attached to those shares, and agreements restricting their transfer can affect the assessment. For married spouses in Ontario, business interests generally form part of the net family property calculation. The valuation date is usually the date of separation when there is no reasonable prospect of resuming cohabitation. If an interest was owned before marriage, a separate marriage-date valuation may also be needed to establish the claimed deduction. A current estimate prepared for a potential sale may therefore answer a different question from a valuation prepared for equalization. Before comparing figures, the parties should confirm that the reports address the same ownership interest, purpose, and date.
Why Valuations Can Differ
Business valuation involves professional judgment. Two valuators may use different assumptions about future earnings, business risks, or the information available. A disagreement does not, by itself, establish that either report is unreliable.
Common areas of disagreement include:
- Whether recent earnings reflect sustainable performance or unusual events.
- Adjustments for owner compensation, personal expenses, or one-time costs.
- The business’s dependence on its owner or a small number of customers.
- The treatment of debt, surplus assets, and potential tax liabilities.
- The method used and the assumptions supporting it.
For example, an unusually profitable year may reflect a contract that will not recur. Treating that year as typical could produce a different value from an assessment based on more sustainable earnings. The useful question is which approach the evidence supports.
Reliable Records and an Appropriate Valuation Report
Financial statements and tax returns are important starting points, but additional records may be needed. These can include shareholder agreements, loan records, customer contracts, forecasts, and details of transactions involving family members or related companies. Before treating different valuations as a disagreement between experts, it is important to establish whether both valuators received complete and comparable information. A report based on missing records or unverified explanations may produce a different result for reasons unrelated to the valuation method. A Chartered Business Valuator can identify missing information, seek supporting records, and explain how any remaining limitations affect the conclusion. Obtaining another report does not, by itself, resolve an underlying disclosure problem. The availability and reliability of the information should inform whether the valuation is suitable for the proposed settlement or court proceeding. The scope of the valuation also matters. Calculation, estimate, and comprehensive valuations involve different levels of work. The appropriate level depends on the intended use, complexity, and issues in dispute. A less extensive report still requires support for significant inputs and assumptions.
Narrowing the Disagreement Between Experts
Where separate reports exist, comparing their underlying assumptions is often more useful than exchanging competing totals. The valuators may agree on most matters but differ on one earnings adjustment or risk assumption that materially changes the result. Written questions, additional disclosure, or a discussion between experts can help identify what remains unresolved. A jointly retained expert may also be an option, with clear instructions about scope, access to information, costs, and questions about the report. The choice can affect later evidence: under Ontario’s Family Law Rules, if a joint litigation expert provides opinion evidence on an issue for a party, another litigation expert cannot present opinion evidence on that issue for that party unless the court orders otherwise. This does not prevent questions about the joint report or cross-examination of the joint expert. In Ontario family proceedings, experts must provide fair, objective, and non-partisan opinion evidence. Their role is to assist the court within their expertise, regardless of which party retained them.
Using the Valuation to Move Negotiations Forward
A supported valuation provides a basis for negotiation; it does not resolve every settlement issue. Payment timing, financing, tax consequences, and income available for support may still require separate analysis. Before commissioning further work, the parties should identify how much the disputed issue could change the proposed settlement and what evidence would help resolve it. A missing contract or an explanation of an unusual expense may answer a specific concern without requiring another full valuation. Where a significant disagreement remains, further expert evidence or a court determination may be needed.
