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Engineering Based Business

Engineering Based Business

Brett was involved in acting for a client who had established a very successful engineering based business.  This business had grown throughout a long marriage where there were four children.

The business had a substantial turnover with over 100 staff members.

One of the major difficulties in this matter was that the independent business valuation has produced a substantial value for goodwill.  In other words, the actual assets in the business were small compared to the size of the goodwill component.

In other words, this was a business that had substantial maintainable earning, but did not have a substantial liquid set of assets.

The business assets were somewhere in the vicinity of 20-30M, but the goodwill added a further 80-100M to the value of this business.

There was nothing wrong with the business valuation.  This was a very successful business that had been built up by the entrepreneurial efforts of Brett’s client, but at the same time, there were important contributions made by the wife, who had raised the children and supported the husband in his business endeavours.

Ultimately at mediation the matter was able to be settled, despite the huge problems with the blue sky goodwill component.

A settlement was structured whereby a substantial cash payment was made upfront to the wife, together with the transfer of property.  However, that alone was well below a percentage entitlement if one took the goodwill value at its highest.
The difficulty here was the sale of the business was not a possibility and even if it could be sold, it was unknown as to whether the sale price in the commercial world would reflect the substantial profits.

There were also difficulties with making long term payments over time as it is always best to try to have a clean cut when making a final matrimonial settlement.

Payments over a few years are okay, but in Brett’s experience, payments over a long period of time are to be avoided if possible.

Brett was able to secure a deal for the client that provided some further payments to the wife over a two – three year period, which enabled his client to maintain his substantial business interest.

The wife was also sensible in her position with her lawyers, by agreeing to take as much of the cash and substantial property, as well as payments over a reasonable period of time.  Whilst, it could be said that the wife was receiving less than her entitlement by taking a deal less than 50%, the reality is that it was still a substantial deal with a greater guarantee of monies being received now and in the future, rather than a very expensive long and lengthy battle where an outcome may be uncertain in the future.

The lesson to be learned from this matter, is that one always needs to focus on trying to settle even when it looks impossible.  Entering into the Mediation, Brett had grave doubts about a settlement, however, a sensible commercial approach and a very intelligent and sensible lawyer on the other side enabled this matter to reach fruition and for both parties to be able to move on substantially with their lives with all major assets intact.


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