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Lost in translation: appointing an expert who will avoid international business valuation pitfalls
- Sep 15, 2026
- Latest Journal
by Neil Rudd, Associate Director in the Forensic Services Team at Crowe U.K. LLP.
Introduction
In an increasingly globalised economy, business valuations have developed a habit of refusing to
stay neatly within national borders, with valuers having to navigate multiple jurisdictions, regulatory
frameworks and economic environments. While the fundamental valuation methodologies remain unchanged, the reality is that international valuations introduce layers of complexity that can turn what initially appears to be a walk in the park into a hike through the woods.
This article explores the practical realities of international and cross-border valuations, highlighting issues that solicitors should consider when selecting, instructing and assessing expert valuation evidence. It examines key pitfalls to avoid, highlighting how seemingly innocuous yet inappropriate assumptions can undermine both the valuation, an expert’s credibility and, in turn, the weight given to expert evidence.
Same toolkit, more moving parts
The reassuring news is that valuers do not require a completely new box of tools, with International
Valuation Standards setting out three principal valuation approaches that are equally applicable in
both domestic and international arenas:
• Market approach: Comparing the asset with an identical or comparable asset for which price
information is available.
• Income approach: Converting projected cash flows to a single current value.
• Cost approach: Using the economic principle that a buyer will pay no more for an asset than
the cost to obtain an asset of equal utility.
The less reassuring news is that everything around these tools becomes more complicated. Stability is not universal, with political, economic and regulatory risks rearing their ugly heads. Also, because not all numbers are created equal, data reliability must also be considered.
For solicitors, these additional layers of complexity mean that the choice of expert is particularly
important. Experience in domestic business valuation does not necessarily equate to experience in cross-border matters. An expert should be able to identify jurisdiction-specific risks, explain how they have been addressed, and demonstrate where local specialist input has been obtained where necessary.
Market approach: when comparable isn’t comparable
The market approach relies on identifying comparable companies from which market value information can be obtained. Such market value information may be available because a comparable company has been acquired or is listed on an exchange with actively traded shares. This process of identifying comparable companies may appear straightforward, until you remember that comparable across borders can mean anything from “almost identical” to “shares the same planet”.
One issue can be accounting consistency, as comparable companies may prepare financial
statements under different accounting standards (e.g. IFRS vs US GAAP ). Without appropriate adjustments, the market value information derived from information within the financial statements
can become misleading. This is a “don’t compare apples with oranges” situation.
The question of whether market value information is impacted by local risk conditions must also be
considered. Information derived from a stable, developed market may look very appealing…right up until it is applied to a business operating in a jurisdiction where political stability is more of an aspiration than a reality.
There is also the issue of liquidity and marketability of the comparable company. A listed company is often assumed to represent a reliable benchmark. However, a listing does not guarantee actual trading activity. Some shares are technically traded, but in the same way that an old dusty treadmill is technically used.
From a solicitor’s perspective, these issues provide useful areas of enquiry when considering expert evidence. Understanding why particular comparables have been selected, and whether accounting, regulatory and market differences have been appropriately addressed, can help assess the robustness of the valuation methodology.
Income approach: an assumption minefield
The income approach, which typically involves forecasting cash flows for the business being valued and discounting them to present value, is capable of producing very precise numbers. Unfortunately, precision and accuracy are not always the same thing, with this approach requiring consistency between cash flows, currency and discount rates. A flawed assumption, once embedded in a spreadsheet, can have far-reaching and unintended consequences.
For example, a discount rate incorporating the political, economic and regulatory risks associated with the eurozone as a whole will likely align more with the larger eurozone economies. This is not a “one size fits all” discount rate that can be applied to all eurozone companies though, given the vastly different risk profiles within this large and diverse economic area. Applying a discount rate derived from one economic environment to cash flows generated in another is rather like using a Mediterranean weather forecast to plan what clothes to take on your UK holiday…it is unlikely to end well.
Local tax regimes, which are rarely straightforward and sometimes surprising, can lead to undervaluing or overvaluing a business if they are not fully understood. For example, did you know that in Hungary, companies can donate up to 80% of their corporation tax liability to eligible sports clubs instead of paying it to the state treasury? If this is misunderstood, a valuer may overstate future tax payments, not realising they are already forecast under donations, artificially depressing forecast cash flows and undervaluing the business.
Solicitors should pay particular attention to assumptions for which small changes can have a large impact on value. Discount rates, growth assumptions and tax treatments are often among the most contentious aspects of a valuation and can substantially influence the expert’s conclusion.
Cost approach: balance sheets and the illusion of simplicity
The cost approach appears reassuringly straightforward: value the assets, deduct the liabilities, and arrive at equity value. Internationally, however, this simplicity can be deceptive. Differences in accounting standards, valuation practices, and approaches to estimates and assumptions mean that asset and liability figures may not be prepared on a basis that is aligned with a business valuer’s expectations.
A prominent example is the differences in lease accounting rules between IFRS and US GAAP. Depending on the situation, leased assets may or may not be recognised on balance sheets. Approaches to the recognition and valuation of intangible assets can also be wildly different under different regimes.
Particular assets and liabilities may rely on the work of other specialist valuers, for example a RICS valuation of a property by a chartered surveyor. While RICS is aligned with International Valuation Standards and is used in many jurisdictions, other local property valuation methodologies may have instead been employed, leading to misleading asset values on a balance sheet.
A keen awareness of potential differences is key in order to address whether and how adjustments to asset and liability values should be applied. In short, while the cost approach may promise a neatly balanced answer, in practice the balance sheet may be decidedly wobbly and demand a very careful second look.
Where a valuation relies substantially on balance sheet values, solicitors may wish to understand whether the expert has independently assessed the underlying asset and liability values, or whether they have relied upon figures prepared under local accounting or valuation conventions.
Practical takeaways for solicitors appointing expert witnesses
If you have a case involving an international or crossborder business valuation, and need to appoint an expert witness or consider the robustness of a report provided, the following practical takeaways are worth bearing in mind:
• International valuation experience: An expert should be able to demonstrate experience of dealing with cross-border valuations, differing accounting frameworks, and jurisdictional risk factors.
• Global footprint of the expert’s firm: Will the expert have good access to local expertise and information in the required jurisdictions, if required?
• Early engagement: The earlier an expert is engaged, the earlier they may be able to make
you aware of potential challenges relating to data availability, accounting differences and local tax considerations, for example.
• Scrutinise key assumptions and data sources: Are assumptions regarding political risk, economic conditions, taxation, accounting standards and market comparables clearly explained, evidence-based and capable of withstanding challenge?
• Understand the sensitivity of valuation conclusions: Sensitivity analysis can help identify the assumptions that are driving the expert’s conclusions and highlight areas likely to attract scrutiny from the opposing side.
• Allow sufficient time for the valuation process: International matters may involve additional investigations, translation of documents, reconciliation of accounting differences and consultation with local specialists, which can make them more complex and time-consuming than their domestic counterparts.
Ultimately, the selection and instruction of an expert in an international valuation matter requires more than an assessment of technical valuation credentials alone. Solicitors should ensure that the expert is equipped to identify and navigate jurisdiction-specific risks, explain their assumptions clearly, and, where necessary, coordinate with local specialists. In many cases, the most significant valuation risks arise not from complex valuation theory, but from relatively straightforward misunderstandings of local accounting, tax, legal or economic conditions.
Remember, the devil is in the detail, and the detail sometimes speaks a different language.
About the author
Neil Rudd
Associate Director, Forensic Services
at Crowe U.K. LLP
Neil.Rudd@crowe.co.uk
+44 (0)121 716 5273
Having specialised in forensic accountancy since 2016, Neil is a Fellow of the Association of Chartered Certified Accountants and a Chartered Public Finance Accountant. He supports forensic experts across a range of technical accounting areas in civil, family and criminal matters, as well as investigations into fraud and accounting irregularity. He is adept with regard to contentious and non-contentious valuations.