The Society of Shares and Business Valuers (SSBV) are excited to announce a robust calendar of live and virtual business valuation events for 2022, beginning next week on 23 February with Michael Blake’s Putting the Science Back in Startup Valuations. Blake’s presentations are thoughtful, practical, and entertaining, so this virtual session should be a delight.

Details on SSBV events throughout the remainder of 2022 are listed in “Dates for Your Diary” below and on ssbv.org. Membership in the organization is not required for the events but is available free at the student and corporate levels—and, for a small fee, at the fellow, full, and associate levels.

SSBV Chair Andrew Caldwell advises that SSBV should not “run before it can walk” as it plans for a great 2022 and beyond, but Graham Antrobus says all UK valuers should be on the lookout for an improved website, a potential BV conference, and perhaps more from SSBV as the year continues.

See you on 23 February for Michael Blake’s session on startup valuations!

A new chapter on financial transactions is in the 2022 edition of the OECD Transfer Pricing Guidelines for Multinational Enterprises and Tax Administrations, released the last week of January. The preface and glossary have also been updated this year. The new edition reflects the post-2017 revision by the Organisation for Economic Co-operation and Development (OECD) of its profit-split guidance as well as guidance for tax administrations regarding hard-to-value intangibles. Other topics that are relied on for transfer pricing valuations include:

• Recommendations for structuring and documenting cost contribution arrangements;

• Performing comparability analyses;

• A three-tiered approach to documenting transfer pricing conclusions; and

• Country-by-country reporting implementation packages.

No need to feel badly for Google or Amazon, either—their brand values both increased 38%. Apple retained the No. 1 spot on the brand value list, at $US350 billion, according to this year’s Brand Finance Global 500 Report 2022, released in early February. Mercedes-Benz and Deutsche Telecom remain the most valuable brands in the EU/UK, at $US60.7 billion and $US60.1 billion, respectively. China and the US dominate brand values, though China’s growth was slowed last year by troubles in the real estate sector, particularly as a result of Evergrande.

Not surprisingly, tech dominates brand value everywhere, even more so as the pandemic boosted its value. Tech was followed by retail—though pharma brand values increased more than most other industry groupings.

Apple’s brand increased partially as it invests in products and services that go beyond small devices. The fastest growing brand is TikTok, and the world’s “strongest” brand is WeChat (for the second year in a row), says the study.

At the moment, inflation continues in the UK, affecting several inputs business valuers use. Increased risk-free rates are the most measurable example. Both producer and consumer sectors are contributing equally.

The job of the valuer is to determine expected future inflation, writes Aswath Damodaran in a recent blog post. What do implied inflation rate sources suggest now to guide current business valuations?

Damodaran offers some guidance:

• The investment community is anticipating higher inflation currently. “Using a measure the US Federal Reserve have developed … 94% of investors expect inflation to be greater than 2.5%,” Damodaran points out.

• Consumer expectation surveys in the UK also indicate higher inflation in 2022, and central banks throughout Europe and the US are discussing interest rate increases, which are always “intertwined” with inflation.

• That being said, other indicators are not suggesting higher inflation this year. Damodaran cites several financial indicators that counter the argument that we’re heading toward 1970s-style inflation. One is that risk capital continues to flow into UK (and global) corporate bonds. Another is that, while the two-to-10-year treasury bill rates increased at the end of 2021, longer-term treasury rates were not significantly altered.

The FactSet Mergerstat Review is a cornerstone of every business valuation library. The new edition delivers the same comprehensive roster of top UK and global transactions so that financial analysts can guarantee they won’t overlook any major transaction in their analyses. As always, the largest privately held, publicly traded, and cross-border transactions are ranked and indexed. The Review is also a standard and reliable source for current control premia and industry multiples. The annual subscription includes the Mergerstat Monthly Review to keep users current on new deal data and trends.

Price: £501.

At first glance, betas derived from a custom group of comparable FTSE companies makes inherent sense. This CAPM input would be more representative, in theory, than traditional betas derived from industry groupings. Investment analysts often create their own custom betas, though they’ve been less commonly available in the business valuation profession.

Kroll are developing a new module for its Cost of Capital Navigator that will enable users to derive company-level betas based on their own selection of comparable companies. During a recent BVR webinar, Carla Nunes and Jim Harrington (both with Kroll) mentioned that they are conducting a survey to help determine what custom beta features business valuers would use. BVWire—UK will report on the findings from Nunes and Harrington’s survey in a future issue.

In Tribe v Elborne Mitchell LLP [2021] EWHC 1863 (Ch), a long-term LLP partner claimed he was not awarded a fair profit share for multiple years. Fortunately, this new High Court decision confirms that managing members of an LLP are held to a particular standard when allocating profits—but that evidence of a reasonable and explicable process makes it difficult to challenge any ultimate decision as to profit allocation.

In Tribe, the court found that the profit allocation had been within the range of reasonable proposals.

The court here reaffirmed discretionary LLP profit distribution principles developed in Braganza v BP Shipping Ltd Braganza v BP Shipping Ltd [2015] UKSC 17. Senior partners should not “take into account irrelevant matters or ignore relevant ones” or make distribution recommendations “outside the range of reasonable proposals that might be made in the circumstances.”

17-18 February: ICAEW Advanced Valuation Techniques, virtual classroom

23 February: Society of Shares and Business Valuers’ Putting the Science Back Into Startup Valuations With Michael Blake, virtual, 4:30 p.m.-6 p.m.

29-30 March: IPBC Europe IP Value Creation Conference, London

29 March: Society of Shares and Business Valuers’ Protective Put Option Theory—The Use of Mathematical Models in Valuation Cases to Calculate a DLOM With Andrew Strickland,
London, 5:30 p.m.-7 p.m.

12-20 April: ICAEW Practical Business Valuation, virtual classroom. Repeated 21-29 June.

15 June: Society of Shares and Business Valuers’ Minority Interest Discounts With Sandra Mossios, London, 5:30 p.m.-7 p.m.

9 July: Society of Shares and Business Valuers’ The Absence of Size Effect With Clifford Ang, London and virtual, 5:30 p.m.-7 p.m.

14-16 September: IVSC Annual General Meeting, Fort Lauderdale, Fla.

3-5 October: 12th Annual International Valuation Conference, Riyadh, Saudi Arabia

19 October: Society of Shares and Business Valuers’ How to Lose at the Tax Tribunal With David Bowes, London and virtual, 5:30 p.m.-7 p.m.

7 December: Society of Shares and Business Valuers’ Causation and Financial Losses: Factors to Consider With Prem Lobo, London and virtual, 5:30 p.m.-7 p.m.

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