BVWire was on the scene last week in Toronto as over 600 attendees enjoyed three days of excellent sessions at the ASA-CICBV Business Valuation Conference jointly hosted by the American Society of Appraisers and the Canadian Institute of Chartered Business Valuators. The great thing about attending a conference such as this is the chance to collect valuable information, not only in the sessions, but also at the many networking opportunities the event offers. Below are just a few of the insights we collected both in the sessions and during the breaks.
John Paglia, Ph.D. (Pepperdine University), founder of the Pepperdine Private Capital Markets project, reveals that in five years appraisers of private companies say they will be putting more weight on sources from private markets than public markets to determine the cost of capital, a “huge change” for the profession.
The biggest BV problem in litigation is company-specific risk, says Roger Grabowski (Duff & Phelps). Judges are totally skeptical of it. With this challenge in mind, Chapter 16 of the 5th edition of his Cost of Capital: Applications and Examples book (co-authored with Shannon Pratt) is devoted to this topic.
Justice Donald Bowman, former chief justice of the Tax Court of Canada, discloses that Canadian judges review U.S. Tax Court rulings and find them “very useful.” Also, expert witnesses should not try to be funny or they'll compete with judges who already believe they are.
John Stockdale, a sole practitioner and author of BVR's DLOM guide, asks for feedback on his new paper on volatility.
Business valuation engagements with real estate and machinery and equipment in the mix are prone to errors, Alex Ruden (Southeast Appraisal) tells us. Coordination between the valuation disciplines is sorely needed.
A key trend affecting oil and gas valuations is that by 2018 the U.S. will shift from being a natural gas importer to being an exporter, according to Kristopher Zack and Justin Bouchard (both with Desjardins Securities Inc.). This will put pressure on producers to find new markets.
Michael Badham (International Institute of Business Valuers) announces that the Saudi Arabia Institute of Business Valuation is a new member of the IIBV—a very positive development. The IIBV is a leader in BV education and provides ongoing training in locations such as the United Kingdom, Russia, Hungary, Australia, and South America.
New case buzz: During a cocktail reception, there was a lot of talk about a newly released court decision in New York involving the valuation of a 50% interest in the company that makes AriZona Iced Tea. The ruling is chock full of BV issues, including the court’s relying solely on a DCF analysis despite “expressions of interest” from potential company buyers. It also involves DLOM, valuation of synergies, key man discount, EBITDA adjustments, a tax amortization benefit, discount rate, and more. Stay tuned for more coverage here and in Business Valuation Update (subscription required).
We’ll have more from the ASA-CICBV conference in next week’s BVWire.