The Covid-19 pandemic has been a difficult time for many people, with the monotony of working from home, the anxieties and frustrations of childcare and home schooling, plus sleepless nights caused by financial worries and concerns for our friends and family who we have not been able to visit. Unfortunately, along with all these problems, the lockdown is also putting huge pressure on relationships.
Even prior to lockdown, lawyers had warned that coronavirus is ‘very likely’ to lead to an increase in UK marriage break-ups. They have the insight to know that peak times for divorce occur after periods together, usually during the summer holidays and over Christmas, and sadly, the lockdown is likely to be no different.
Divorcing couples often find that reaching a financial settlement is the most challenging part of the divorce process.
In particular, if you’re a business owner a divorce can lead to the ownership of the business being transferred to your spouse and potentially the involvement of an ex-spouse in the business post- divorce. This scenario is unlikely to be in anyone’s interest.
It is useful to obtain an expert valuation from an independent third party, whether you and your spouse are in court proceedings about your matrimonial finances or discussing matters between yourselves (with or without a mediator or lawyer). Either party may inflate or deflate the value of a business or its individual assets, knowingly or otherwise, and it is vital you seek the best advice, in the form of an expert in such valuations.
To enable you, or indeed a judge, to consider what will be a fair division of your assets, their true value must be established. It may well be possible that one party retains the business and the other the marital home, and ordinarily if it is affordable that will be the outcome. This tends to be the case as it is often difficult for both parties to maintain a joint interest after the divorce, particularly as usually it is the income stream for one party.
The expert may also identify inconsistencies, unexplained variances or trends which they need to investigate in order to provide an opinion on the valuation of the business. This process could in turn raise questions about potential hidden assets.
When valuing a business, the expert will likely consider a variety of matters such as the trading history of the business, its particular industry sector, and future profit projections. There are numerous ways to value a business and depending on the nature of the business, the expert will assess the extent to which the net value of the assets or the trading profitability should be balanced against each other when valuing the business as a whole.
The expert may also undertake research specific to that business in order to apply a ‘multiple’ to profits that might be appropriate to the business’s size, location, sector and circumstances. They may also consider whether the percentage held in the business, by one or both spouses, should be ‘discounted’ to reflect the level of influence that the holding might have over the business.
At HW Fisher we have a highly experienced valuations team who specialise in business valuations. Whether you run the business yourself or it is your spouse’s business, we can ensure that all aspects of the trade and assets of a business are taken into account. We will review the assets and liabilities of the business, consider future cash flows, consider specific risks associated with the business and review comparable companies in order to establish a fair valuation to assist in achieving a fair financial settlement for both parties.
If you wish to discuss your circumstances or have any questions, please contact us.