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26th Floor, Tower Life Bldg.
310 S. St. Mary's Street
San Antonio, Texas 78205
Tel: 210-225-5567
Fax: 210-267-7777
richard@ondafamilylaw.com

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Richard Orsinger


Experts Valuing a Medical Practice

In February, 2006, Richard Orsinger participated in a Daubert/Robinson hearing to determine whether the opinion testimony of two experts could be admitted before the jury as to the value of the community estate's interest in a medical practice. At issue was the value of a fractional interest in a medical professional association ("PA"). The hearing involved a determination of the amount of profits earned by the PA, and the appropriate capitalization rate (or income multiplier) to be used to convert those profits into a value of the entity. Since the community estate's interest was a minority interest, there was also a fight over the appropriate minority discount and marketability discount to be applied to the community estate's fractional interest in the PA. Another issue was the appropriate method for excluding the doctor-spouse's "personal goodwill," which must be excluded from the community estate's interest, under the Texas Supreme Court's decision in Nail v. Nail, 486 S.W.2d 761 (Tex. 1972). Finally, there was a legal and factual dispute over the effect of a buy-sell restriction on the company's stock. After a two-day hearing, the Court ruled that both of Mr. Orsinger's experts would be allowed to testify. Shortly thereafter, the case settled.

The valuation of a medical practice can be contentious, and expert testimony is normally required. Typically the expert is a CPA experienced in business valuation. Since the determination of value requires an understanding of statistical surveys, financial information of the business in question, and applicable case law, if your case involves business valuation then you need a valuation expert and a lawyer who can help the friendly expert explain their opinion and draw out the weaknesses in the opposing expert's opinions.

Board Certified in Family Law and Civil Appellate Law by the Texas Board of Legal Specialization.

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