Home security company sale agreement

Americas

The retiring founder of a home security business agreed to sell his ownership interest to a large corporation. Under their agreement, the valuation – over which the parties were sharply divided – would be decided by binding arbitration.

Brief

An HKA specialist in commercial damages and disputerelated valuations was appointed as neutral valuation expert. The brief was to evaluate the conflicting valuations provided by the seller and buyer, and determine in an impartial manner which more closely reflected fair market value.

What we did

The team brought experience of this niche market and an understanding of comparable business models to the assignment. Our experience in providing neutral services in post-acquisition disputes was also valuable in designing a process, procedures and schedule that would be seen to be even-handed and transparent.

The divergent valuations provided by the parties’ appointed experts were evaluated by the team, along with all supporting documentation. At a series of hearings – joint and separate, as appropriate – both sides were able to explain the rationale for their valuations and the methodologies they followed.

The team also undertook its own, independent valuation of what was a complex business, given its nature and market conditions. This was based on applicable valuation standards, our accumulated business knowledge, and a robust calculation of fair market value – which the parties’ retained experts had interpreted very differently.

Outcomes

Under the terms of the shareholder agreement that governed the buyout, the more accurate estimate of the business’s value – which was significantly closer to our neutral valuation – determined the sale price.