Technology Valuations

Approach

Expert valuation evidence

Expert valuation evidence on behalf of the Claimants was put forward by Dr David Sharp, of Charteris plc, that the valuations were at least an order of magnitude higher than they should have been by reference to their cost and due diligence which should have been done on the forecast cash flows underlying the valuations.

Expert valuation evidence for Collyer Bristow and the two former partners was put forward by Mr Thayne Forbes of Intangible Business Limited. Thayne Forbes’ evidence was that the income approach or discounted cash flow approach was almost invariably used (rather than cost), that due diligence is difficult and may support a wide range of income projections. In addition the valuations were in the range he would expect, although that was a very substantial range.

Mr Justice Hamblen agreed with Thayne Forbes that the income approach is the usual and most appropriate method to value start-up technology. He noted that Mr Forbes had more experience of start-up technology valuations than Dr Sharp. He accepted Thayne Forbes’ evidence that due diligence is a very difficult exercise which may support a wide range of income projections, but concluded that this did not mean that no meaningful due diligence can ever be done. He found that the failure to carry out due diligence on the business plans and projected income figures was a shortcoming of the valuations which were produced at the time of the Innovator Schemes. However he went on to find that that did not, however, mean that the technologies had no or no real value, nor did it mean that they had only minimal value. The likely outcome of any such due diligence would have been to support a wide range of income projections, and the projections actually produced are unlikely to have been outside that range. Mr Justice Hamblen found that the technology rights were of real value, that that value was more than minimal and did bear relation to the acquisition costs.