Mark Zyla (Acuitas) believes so. He makes the point that he’s seeing more appraisals where the market approach has less validity than in the past. Partially, this is because “comparables come and go as M&A activity increases,” he told attendees today at the ASA’s Advanced BV Conference. But, in addition, the downturn has created “noise” between market prices and management expectations, Mark believes. “All of your comparables can be ‘distressed’ by market activities, while management still believes equally as strongly in their forecasts,” he says.
“You’re going to see more challenges on your comps from the courts, regulators, and leaders in our profession,” Mark says. Some appraisers are trying to replace ratios derived from recent transactions with the use of longer term multiples to compensate for the lack of good current comparables, he says--though this introduces yet another set of assumptions that need to be defended to auditors and others.