Conflicts between partners over the value of the company are one of the leading causes of litigation in France and Europe. If not anticipated, these disagreements can lead to lengthy, costly, value-destroying and emotionally difficult proceedings.
Trade publications, notably the article Judicial Business Valuation in Finland (EBVM 1/2024), confirm that such disputes are frequent, and that the absence of a prior framework almost always leads to differences of interpretation on valuation methods, assumptions or objectives.
This article outlines the factors that give rise to conflicts of value between partners, and sets out recognized best practices for avoiding them, based on international professional standards and XVAL's operational experience in valuation in the context of conflicts between partners.
1. Why are value conflicts between associates so common?
Disagreements rarely arise from a simple calculation. They almost always stem from divergent analyses of one or more structuring elements of the valuation.
1.1. Contrasting expectations depending on the partner's position
Outgoing partners generally seek to maximize the value of their shares, while remaining partners often seek to preserve the company's liquidity or minimize the financial impact of the buyout.
This asymmetry of interest is one of the most documented points in the disputes analyzed in the EBVM: it mechanically creates tension around growth assumptions, risks and the return on capital.
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1.2. The absence of a pre-established method
The absence of prior agreement on the valuation method is a major factor in disputes.
According to the EBVM article on judicial valuation in Europe, courts are often forced to arbitrate between several methods proposed by the parties, as no rules have been defined in the articles of association or covenants. The partners then each produce their own expert, leading to sometimes significant discrepancies.
1.3. Lack of reliable or shared financial information
Financial transparency is essential to reduce disputes.
When the company does not have :
- a reliable reporting system,
- a consistent operating history,
- a clear vision of risks,
valuations can vary widely, opening the door to divergent interpretations.
1.4. Lack of neutrality in assumptions
The article EBVM Simulation-Based Valuation of Companies (2023) reminds us that non-objective assumptions (growth, risk, rates, projections) lead to incompatible results.
When partners separate, each party may be tempted to adopt biased assumptions. Hence the need for an independent third party.
2. Professional methods for avoiding valuation conflicts when partners separate
To limit disagreements, international standards (IVSC), EACVA analyses and feedback from litigation converge on five best practices.
2.1. Define a valuation framework upstream: articles of association or partnership agreement
The best way to prevent disputes is to formalize the valuation rules in :
- bylaws,
- a partnership agreement,
- or a clear extra-statutory agreement.
These documents can specify :
- the valuation method(s) to be used,
- reference financial data,
- how often the values are updated,
- the appointment of an external expert in the event of disagreement.
Judicial studies analyzed in the EBVM show that when these rules are absent, conflicts are almost systematic.
2.2 Imposing methodological neutrality through an independent expert
The IVSC standards emphasize three fundamental principles for reliable valuation:
- independence,
- objectivity,
- transparency.
In the event of a separation, the involvement of an independent expert makes it possible to :
- avoid partisan interests,
- to unify hypotheses,
- ensure methodological consistency,
- align the parties on a common basis.
XVAL systematically applies these principles to ensure an impartial assessment.
2.3. Use several methods and justify weighting
European courts often assess companies according to several approaches:
- DCF,
- multiple,
- net asset value,
- relief-from-royalty (for intangible assets),
- sector methods.
EBVM publications stress the importance of combining several methods to reduce bias.
Weighting must be explained, documented and approved by both parties.
2.4. Implement preventive and regular value enhancement
This is one of the major lessons learned from EACVA practitioners:
when a valuation is carried out every 2 to 3 years, associates have an objective benchmark that considerably reduces conflicts.
XVAL offers precisely this type of preventive approach through periodic assessments.
2.5. Formalize a clear exit mechanism
Modern covenants often include :
- buyback clauses,
- adjustment formulas,
- gradual exit mechanisms,
- rules for managing disagreements.
These tools reduce legal and financial uncertainty, and limit litigation.
3. How XVAL secures the separation of partners
Thanks to a methodology based on international standards and several thousand cases handled each year, XVAL secures separation processes around three pillars.
3.1. A transparent, documented methodology
All assumptions are explicitly stated:
- financial restatements,
- projections,
- risk analysis,
- justification of the multiples used.
This transparency protects the parties against subjective interpretations.
3.2. Recognized independent expertise
As advocated by the IVSC, independence is essential to ensure the legitimacy of the assessment.
XVAL acts exclusively as a neutral third party, which facilitates acceptance of the result.
3.3. Advanced analysis tools
XVAL analyses are based on :
- European sector databases,
- recognized financial models (DCF, EVA, multiples),
- advanced approaches inspired by EBVM work (risk analysis, cash-flow consistency, scenario sensitivity).
The objective: a robust, comprehensible and legally defensible value.
Conclusion
Valuation conflicts in the event of a partnership split almost always stem from a lack of foresight, an inadequate framework or a lack of objectivity in the valuation process. Professional publications (EACVA, IVSC, EBVM) remind us that without clear methods and an independent expert, discrepancies are inevitable.
Avoiding conflict involves :
- the prior definition of valuation rules,
- total transparency of assumptions,
- the intervention of a neutral expert,
- the use of recognized and convergent methods.
By applying these principles, XVAL enables partners to obtain a fair, objective and legally sound valuation, limiting tensions and protecting the company's value over the long term. Request a quote or a consultation with a XVAL consultant:
