BVR Logo 17 January 2023 | Issue 46-1

BVWire—UK is a free service from BVR focusing on the business valuation profession in the United Kingdom. We offer news and perspectives from valuation thought leaders, the High Courts, HMRC, SSBV, ICAEW, IVSC, and more.

Please be in touch with your perspectives, news, and ideas—and pass this issue along to colleagues (complimentary sign-up instructions are here).

Another fun (and helpful) post from The Footnotes Analyst

Last week’s post addresses the complex relationship between intrinsic value and the market risk premium. It begins with the premise, often cited by equity investors, that a DCF will derive “intrinsic” value while valuation multiples derive only “relative” value.

Since many users of business valuation reports frown on DCF analysis, this belief presents particular challenges when trying to achieve IVS-mandated objectivity standards. Does a market data-based conclusion of value derive a price, or a value? Relative to what standard? How much should it then be discounted for willing buyer, willing seller standards?

Fortunately, Steve Cooper (who worked at IASB) and Dennis Jullens, the authors, have an answer that is quite supportive of the business valuation profession:

[T]his view is not only simplistic—both DCF and valuation multiples can be used in a so-called absolute and relative sense—but it can be incorrect.… All equity values, including those presented in financial statements, are measured relative to either current or historical market prices.

To prove their point, they cite the practice (by investors or particularly private equity buyers hoping to close their next deal) of “reverse DCF”:

Simply construct a DCF model based on your best estimate of all input assumptions and then flex one of these assumptions so that the DCF value equals the current stock price.

As usual, this latest post includes an interactive model regarding target enterprise value multiples. The model is a great way to show that, as Cooper and Jullens say, “the target multiples in the model are based on the same value drivers used in the DCF, except without the detailed explicit forecast used in a typical DCF” analysis.

IVS and USPAP business valuation standards updates coming soon

For ASA members in the UK, comments on the final exposure draft are due 13 February. Very few changes in this update influence business valuation practice—the major change is the addition of a nondiscrimination ethics section that targets fair housing and other real property issues. The new update also includes minor wording changes about the documentation required in a valuation report.

Meanwhile, this April, the International Valuation Standards Council (IVSC) will publish an exposure draft outlining proposed updates to the International Valuation Standards (IVS) as well as the asset-specific standards (covering tangible assets, business and intangibles, and financial instruments). There will be a public comment period of 12 weeks, during which the IVSC will organize a series of webinars and roundtables to present details of the exposure draft. An updated version of IVS will be published in January 2024. More details will be forthcoming in early this year. For more information on the project, click here.

All MergerMarket Top 10 M&A advisors experienced significant value drops in 2022

According to MergerMarket, Goldman came out on top again in total deal value, as shown in the table below. Here’s how the final numbers came out, after all the press releases and deal news promoting the “recovery” we all shared in 2022.




% Change YoY











Morgen Stanley




Bank of America












Credit Suisse




Rothschild & Co




BNP Paribas






All in all, it was a difficult year for the big investment houses. Those who moved up did so by having smaller decreases than their colleagues across the street.

Not enough financial data? Perhaps because there’s now too much

In Dr. Damodaran’s latest (7 January) post, he reflects on the data variables he collects and estimates every year (BVR makes use of some of Aswath’s conclusions in our Cost of Capital Pro).

His conclusion as he begins the cycle for 2023: What was once a trickle is “now a flood.”

He recalls the halcyon (perhaps they weren’t as great as we recall) days when, “to obtain [U.S.] company-level information, you needed to find its annual reports in physical form and for industry-level data, you were dependent on services that computed and reported industry averages, such as Value Line and S&P.”

Among other things, Aswath gently reminds all analysts and BV experts of four common errors that often creep in once data become overwhelming.

  1. Get perspective: “One of the challenges that anyone doing business analysis, investing or valuation faces is getting a measure of what comprises a reasonable value for a business metric.” This makes it “easy to create ‘fairy tale’ valuations and analyses … without a sense of the cross sectional distribution of that metric at the time.”
  1. Mean reversion: “The tendency for numbers to move back towards averages is a strong one. That said, to use mean reversion in analysis or investing, you need to know what these averages are, either over time or across companies, and data can help in that pursuit.”
  1. Counter made-up numbers: Analysts and everyone else often make assertions without complete evidence, Damodaran states. “Rather than indulge in endless debates, where each side provides anecdotal evidence, data can prove to be the tie-breaker.”
  1. Check rules of thumb: “Looking at the data can help you detect rules of thumb that work from those that do not.”
Dates for your diary

16-17 February: ICAEW Advanced Valuation Techniques, two days, virtual classroom (repeated 1-2 June)

11 April: ICAEW Practical Business Valuation, four days, virtual classroom (repeated 21 June)

Want to share a news item? Have feedback or comments? Please contact David Foster at

Want to share a news item? Have feedback or comments? Please contact
David Foster at

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