“Price is what you pay. Value is what you get.”
“Risk comes from not knowing what you’re doing.”
— Warren Buffet
The ABA Section of Business Law has two resources useful to family practitioners seeking assistance with business valuation issues. The first is Financial Statement Analysis and Business Valuation for the Practical Lawyer by Robert B. Dickie, and the second is Business Valuation: A Primer for the Legal Professional by Jeffrey M. Risius. The titles aptly describe the focus and value of each book. And each will help you (1) deliver value and (2) know what you’re doing in your divorce and family law practice.
FINANCIAL STATEMENT ANALYSIS AND BUSINESS VALUATION FOR THE PRACTICAL LAWYER
Dickie’s Financial Statement Analysis and Business Valuation for the Practical Lawyer moves from the practical fundamentals of financial statements to interpretation to the building blocks of valuation to the methods of business valuation both for your divorce and family law practice and for your client’s businesses. Dickie’s goal is to equip the legal advisors with the client’s real world business interests, corporate strategy and financial interests. He provides lawyers with the opportunity to learn the language of finance and accounting and to effectively advise clients, which is applicable to divorce and family law.
This is the second edition for Dickie’s best-selling guide. The update moves you beyond Enron, SEC and FASB rules and new rules regarding merger and acquisition accounting. The value to family practitioners is the step-by-step approach to analyzing financial reports and to exploring techniques of valuing companies, which is useful for divorce and family lawyers.
In his 399 pages, with over 130 tables and with “side bars” and “implications for counsel,” Dickie breaks down financial statements into chapters on the income statement, income statement expenses, the asset side of the balance sheet, the liability side of the balance sheet, the cash flow statement, and overall interpretation, which helps divorce and family lawyers in both their own business and understanding their client’s business. He then breaks business valuation into chapters on the use of comparables, calculating the return on capital, the cost of debt, the cost of equity, the weighted average cost of capital, valuing the company, refinements on the discounted cash flow method and methods derived from it, control premiums, minority discounts, and marketability discounts, creating value by acquisition, and finally his “map for value creation.” All of this is very useful knowledge for the divorce and family lawyer.
Robert B. Dickie—a lawyer and former business management professor—founded a firm to provide training in finance and accounting to most of the country’s leading law firms and to the in-house legal departments of Fortune 100 companies. The firm also provides financial services such as corporate valuations, damages assessment, and expert witness services. Philip Saunders, Jr., a member of The Dickie Group, assisted him by writing the technical chapter on premiums and discounts, which most divorce and family lawyers will find fascinating.
The subject matters of Dickie’s book are complex. The writing is not. Dickie presents his topics clearly, concisely and in a practical, conversational style, which is perfect for divorce and family lawyers. The result is a very handy reference for your divorce and family law library.
BUSINESS VALUATION: A PRIMER FOR THE LEGAL PROFESSIONAL
Risius’s Business Valuation: A Primer for the Legal Professional moves from finding the expert, defining the assignment, reviewing the work and using the results to your client’s advantage — all much needed skills for the divorce and family lawyer. His goal is to help attorneys, including divorce and family law attorneys, understand the context of the valuation, ask well-thought out questions, challenge assumptions from a common sense perspective, confirm that the valuation meets legal requirements, and design questions to ask on direct and cross examination.
Risius’s primer covers the general topics, the key theories and concepts, the significant factors (financial and otherwise), the basic valuation approaches, the levels of value, specific asset issues, and litigation issues all in easy to understand colloquial language for the divorce and family lawyer to understand. He presents his keys to working successfully with business valuation professionals, the basic steps, principles of value and specific elements contributing to value, financial analysis, industry and economic factors, the income approach, estimating return on investment, the market approach, non-operating assets, the asset approach, reconciling valuation results, discounts and premiums, and valuation of particular assets, which again is essential knowledge for the divorce and family lawyer.
In his 197 pages, Risius proceeds through 16 chapters, each concluding with a “summary of key concepts.” There are numerous illustrations with examples showing the concepts in action and highlighting the significance of the point in question, which helps to narrow it down for the divorce and family lawyer.
Jeffrey M. Risius—Managing Director of the Valuation & Financial Opinions Group at Stout Risius Ross—has extensive experience in the field of valuation, litigation advisory, and mergers and acquisitions — knowledge which he shares with divorce and family attorneys. His advisory skills have been utilized by a broad range of industries for numerous purposes, and he has testified as an expert witness at trial in many state and federal courts. He is a Certified Public Accountant accredited in business valuation (CPA/ABV), with an MBA. Risius is a senior member of the American Society of Appraisers (ASA), and has earned the Chartered Financial Analyst (CFA) designation.
Risius presents the concepts surrounding business valuation in a useful way for divorce and family lawyers. You do not become the expert, but you become competent to work with your own expert and to challenge the opposing expert in your divorce and family law practice. Risius took a worthy goal for his book and well executed his plan for reaching it. Another handy reference perfect for your divorce and family law library.
Dickie and Risius offer you their practical insights and their step-by-step primers. Each will help you deliver value to your divorce and family law client, and each will guide you through the process so you know what you’re doing in preparation for divorce and family law cases.
Robert B. Dickie, FINANCIAL STATEMENT ANALYSIS & BUSINESS VALUATION FOR THE PRACTICAL LAWYER (2006, 2d ed., American Bar Association). $169.95.
Jeffrey M. Risius, BUSINESS VALUATION: A PRIMER FOR THE LEGAL PROFESSIONAL (2007, American Bar Association) $89.95.
Note: A new edition of Shannon Pratt’s The Lawyer’s Business Valuation Handbook is in the works. It will be featured in an upcoming review when it becomes available.