More evidence that this could be the “International Age” of BV: Bill Quackenbush (Advent Valuation Advisors LLC) and Paul Bauman (Tampa, FL) just returned from Beijing, where they taught two ASA principles of business valuation courses to members of the Chinese Appraisal Society (CAS). Established in 1993, the CAS is a quasi-governmental agency that licenses appraisers and now boasts more than 30,000 members. In 1995 it joined the International Valuation Standards Committee and in 2005 it joined the World Association of Valuation. Currently, CAS “has established close ties with more than twenty countries and regional associations of the appraisal profession,” according to its English version website.
The CAS has grown alongside increasing foreign investment in China, Quackenbush says. “Apparently, the value of foreign investment must be ‘substantiated’ by an appraisal performed by a Chinese-licensed appraiser, and the transaction price must closely coincide with the appraisal. Foreign investors would be well-served to have their own appraiser oversee the process,” he adds, “someone who understands the unique issues.” For example, Chinese citizens are restricted in placing foreign investments, so the Chinese stock markets are considered “over-invested and over-priced. That obviously can affect value,” Quackenbush observes, “much the same way the ‘dotcom’ boom here affected technology company values a decade ago.”
Another example: the Shanghai Composite Index was up 97% in 2007, even after falling 14% from an October high. And though China’s GDP saw a 12% growth in 2007, The Economist predicts an “easing” of growth to 10% in 2008 and 9.3% in 2009. One valuation firm that plans to ride the Occidental boom: Grant Thornton LLP. “We have a large audit presence over there and have hired ‘approved’ appraisers in Beijing, Shanghai, and Hong Kong,” reports Neil Beaton. “It is a tough regulatory environment, but we snagged some good firms early on, and so have satisfied the ‘Chinese ownership’ rule. We expect to increase 50% percent over the next 12 to 18 months. Valuation folks are hard to come by,” he adds, “so we’re sending people to the U.S. to get the proper training.”
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