Two’s Company, Three’s A Crowd

Our client was an injection molding industry executive in his 40s, who had been invited to partner with a pair of entrepreneurs to launch a plastic injection molding company. The entrepreneurs had connections and capital, but needed a seasoned executive with industry experience to run the company for them. As soon as the company was successfully up and running, the couple fired him. They offered to buy his 1/3 of the business for $1 million without providing any support for how they arrived at that number. Our client suggested hiring an appraiser. In response, the couple unilaterally hired an appraiser who, without input from our client, determined a $2 million valuation for the same 1/3 portion. Our client’s attorney, an astute corporate litigator, who knew the quality of our work from prior experience, came to us to get an unbiased valuation opinion.

When we valued the company, we found his 1/3 share to be worth $5 million. The parties brought the case to arbitration, where the couple’s appraiser, under oath, was unable to substantiate his valuation. He admitted it was based mostly on the input from the other owners, with no input from our client.