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Ecclestone To Face Trial In Germany – 20 January 2014

Member: Nifa

The fact that Bernie Ecclestone is back in the news over the sale of part of his F1 empire is a reminder that company valuations must be transparent.  In addition to now facing a trial in Germany in April, the 83-year-old is currently awaiting a High Court judge’s ruling in a separate £90m civil claim connected to the sale of shares in Formula One.

A German media company brought the civil case against Mr Ecclestone and others, in which claims it lost out when the share of F1 belonging to German bank Bayern Landesbank (LB) was sold in 2006 to private equity group CVC.  However, after two months of wrangling and expert witness statements from both sides, Mr Justice Newey said last month that he would reserve judgement until “a later date”.

Forensic accountants will have been key witnesses in the civil case and in the forthcoming one in Germany, as both cases hinge on complex valuations, which always necessitate sophisticated and expert investigation.  In the civil case, lawyers for the media company maintained that Bayern LB's investment was sold "without the normal and proper process" and for an undervalued price, although at the time of deal, Bayern LB said it was happy with the figures and they would have done thorough due diligence using investigative accountants. 

Then, two years later, a forensic accounting team did another valuation of F1 and agreed that the price was a fair one at the time of the sale.  As a writer for F1 said last year, selling an asset is not mandated by a universal valuation process, nor is a seller obligated to sell to the highest bidder unless that proviso is built into a legal document, so to forensically determine the value of a deal that was transacted seven years ago will be difficult, but if anyone can unravel it, it will be the teams of forensic accountants employed by both sides.

Author: Roger Isaacs, 20 January 2014

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