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Date: 06/09/2016

The UK's historic vote to leave the EU has compounded the complexities of company valuations in divorce cases, warns a leading expert witness.

Chris Walklett, a partner in top 40 accountants Bishop Fleming, and an experienced expert witness, says he has identified a real problem for valuers in such cases where a company valuation is required as part of assessing the value of marital assets.

Mr Walklett said: "Brexit has led to uncertainty for companies, potentially lowering profit multiples to be used in valuation exercises, though we all know media reports can over-egg such risks and should therefore not be exclusively relied on - there are positives too."

Property-based businesses are particularly affected, with increased nervousness amongst investors in that sector.

He added: "Reference material used by experts will all be pre-Brexit, so valuers will need to work harder to substantiate the multiples they use, not least to avoid coming unstuck under cross-examination."

The Bishop Fleming partner also highlights earnings adjustments as an area of concern, as foreign exchange profits and losses will need to be assessed as either one-offs to be adjusted for, or symptomatic of things to come.

Chris Walklett explained: "Exporters will see devalued sterling as an opportunity; it's not all about the negatives."

The expert cites ongoing repercussions from Jones v Jones (2011) and pre-martial assets which increase in value both during and after a marriage. He said it was clear from reports that he had been asked to scrutinise that experts are continuing to struggle with this concept. Brexit will only add to the challenges expert witnesses face.

Mr Walklett said: "This is an area that needs to be grappled with more than ever, as those companies that have already developed their ‘value drivers' will be more resilient and will see continued (latent) growth momentum, versus those who may not. Consider the company that has been developing overseas market opportunities - a devalued pound will really help deliver their export strategy."

Instructing solicitors will need to consider if these issues are material enough to factor into their instructions. At the very least, it will be a consideration when reviewing and querying Single Joint Expert reports, Mr Walklett suggested.

He added: "I can see barristers having a field day with this. Fair or not, unwary expert witnesses could find barristers trying to discredit their work for a failure to consider Brexit in their valuations."