Some takeaways from the ASA Advanced BV Conference

BVWireIssue #204-1
September 11, 2019

valuation profession news
american society of appraisers (ASA), business valuation profession

BVWire attended the ASA Joint 2019 Advanced Business Valuation and International Appraisers Conference in New York sponsored by the American Society of Appraisers. Here are some takeaways from a few of the breakout sessions:

  • “Just explain what you did,” advises Frank Molinari, appraisal team leader at the IRS, who noted that the agency red-flags unsupported opinions of value. Many of the appraisers who work for the IRS were also “on the other side,” and they look objectively at valuations and just want to understand how the expert developed his or her opinion.
  • For litigation engagements, if the other side is not cooperating with a site visit or management interview, ask the judge to intervene, advises the Honorable Matthew F. Cooper, a New York State Supreme Court Justice. He looks “very negatively” at the party that stymies an expert’s access to the subject business.
  • Extended or cross-reality (XR) is the next big wave that is leveraging intellectual property (and its value) in the entertainment and other industries by using immersive technology and digitally replicated humans, says Travis Cloyd (Worldwide XR).
  • Jim Hitchner (Financial Valuation Advisors) compared the Duff & Phelps Cost of Capital Navigator to the “new kid on the block,” BVR’s Cost of Capital Professional, which was shown to be simpler than the Navigator and provide results that are similar to those the Navigator provides.
  • There were several sessions on the size effect when estimating the cost of capital, an input that needs more “intellectual curiosity,” says Adam Smith (PwC). Based on recent academic research, practitioners should not automatically use a size premium but take a fresh look at it and consider other factors. One of these factors is firm quality, and Roger Grabowski and Anas Aboulamer (both with Duff & Phelps), in their session, say that two recent papers show that the size effect continues to be observed and is significant once you take firm quality into account.
  • John Finnerty (Alix Partners) unveiled a new version (not yet published) of his average-strike put option DLOM model that can be generalized to accommodate a restriction period of up to about 10 years (data for longer periods were not available) and also if the length of the restriction period is uncertain. His basic model can be used for a restriction period of up to two years.
  • In the exhibit hall, John Borrowman (Borrowman Baker) told us that valuation firms too often make new hires without sufficient objective input as to their “fit.” Borrowman, a recruiter who has worked exclusively in the BV profession for over 20 years, offers a pre-employment assessment tool to use on BV job candidates (which can also be used for current employees to improve productivity and identify coaching needs). For more information, click here.

More extensive coverage of the conference will be in the October 2019 issue of Business Valuation Update.

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