Leigh Miller says valuation ‘ranges’ still raise questions with auditors, even during COVID-19

BVWire–UKIssue #18-1
September 1, 2020

valuation methods & approaches
income approach, discounted cash flow (DCF), management projections, cash flow projections

Using multiple forecast scenarios has been a commonly practiced approach to market volatility—and many UK business valuers are now saying that it should be used more widely. This doesn’t necessarily mean that the ‘range’ of scenarios should be any wider, even now, says Leigh Miller.

‘I don’t preclude that an outlier might require a larger range … but the answers to the “why” question explaining a wider range need to be very clear,’ he said. Given the expertise of most business valuation professionals, audit committees still need a number for presentation, and ‘I hope the business valuation profession is still prepared to get as close to one as possible.’

Are there any sources that help with scenario planning for cash flows? Most experts BVWire—UK talked to say simply that valuers need to turn to their peers. ‘We can’t pull scenario expectations from an Ivory Tower. The only way is to poll the market, or to find someone else who has,’ one reader told us.

Very few businesses have had the charge to do this kind of careful scenario analysis, another noted. ‘The role of the expert will now often be as a catalyst to start this kind of planning’ and to determine the scope of the work and testing required to analyse the quality of the underlying cash flows. Overall, this trend is likely to increase the demand for qualified business valuers.

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