BVR Logo 16 July 2019 | Issue 4-2

BVWire—UK is a free service from BVR focused on the growing business valuation profession in the United Kingdom. We offer news and perspectives from valuation thought leaders, the High Courts, HMRC, the standard-setters, ICAEW, RICS, 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).

Should business valuators use 'implied' equity risk premiums? Damodaran says yes

The free, 11th annual update to ‘Equity Risk Premiums (ERP): Determinants, Estimation and Implications—The 2019 Edition’ is now available from Professor Aswath Damodaran (New York University Stern School of Business). Damodaran continues to be a strong proponent of the use of the ex ante approach, or ‘implied’ ERPs, which are forward-looking estimates that are extracted by examining stock prices today and expected cash flows in the future (rather than the ex post approach using historical information). Damodaran’s implied ERPs are one of the options available in BVR’s Cost of Capital Professional online platform for estimating the cost of equity.

 

Expert witnesses hold unique power, and responsibility, in the UK court system

‘There is an inevitable tension between an adversarial legal system, with experts being appointed by each side, and the duties of judicious objectivity,’ writes Andrew Strickland (Scrutton Bland) in a new white paper available to BVWire—UK readers as a free download. This tension can be removed by the use of single, jointly appointed experts, which is ‘increasingly what happens in both modestly sized shareholder disputes and divorce cases in the UK.’

Strickland cites a 2018 case in the Winchester County Court where the judge took offence at an expert whose independence appeared to be impaired. Anyone who has testified on business valuation issues in court will understand the danger of the judge’s analysis: The expert’s ‘evidence in this case is so flawed that I cannot rely on any contentious aspect of the same.’ Ouch.

Strickland notes several new cases that offer successful (and unsuccessful) models for BV experts in this new paper:

  • Sudicka and Morgan;
  • Riva Properties Limited and Foster and Partners; and
  • BDW Trading Limited and Integral Geotechnique (Wales) Limited.

As a warning, Strickland cites a new public record comment by a judge regarding the failings of a medical expert. No one wants to see their name associated with a published decision that states the expert ‘did not meet the standards expected of an expert witness or the expectations of the court in this particular case. It cannot be allowed to pass without comment.’ Ouch indeed.

ICAEW releases programme for Annual Business Valuation Conference

The ICAEW’s event, scheduled for 23 October at their Moorgate Place (London) offices, is the largest BV conference in the UK. David Franklin and the ICAEW have just released the preliminary programme, which includes presentations from Jonathan White (KPMG), Professor Trevor Williams (University of Derby), Steve Shaw (Financial Seminars Ltd), Sarah Middleton (PwC), Andrew Strickland (Scrutton Bland), and an update on international valuation standards from the IVSC, among others. Presentation topics include:

  • How to value assets in divorce;
  • Managing family-owned businesses;
  • Advanced valuation techniques;
  • Valuation of intangible assets under FRS 102; and
  • Several keynote sessions on economic trends, ‘bringing numbers to life,’ and more.

BVWire—UK will be covering the conference, and you can view the complete agenda and register here.

BVR offers resources to help UK business valuation professionals

Financial analysts in the UK have often struggled to find auditable market and financial data to support their assumptions and conclusions. BVR now provides a number of products that include UK data to help reduce that challenge. Some of these products include:

  • ktMINE. Provides analyses of full-text licensing payments and agreement terms to support IP valuations; and

Contact Regina Hodel at BVR for further information on these and other resources to support your business valuation engagements.

In addition, BVR is working with business intermediaries in the UK to develop a robust private-company transaction data set as part of DealStats. If you’d like to participate in the DealStats contributor network, or if you’d like more information on UK private-company transactions, contact Adam Manson at BVR.

Fewer, but richer, deals dominate Scottish market, PwC reports

Total transactions in 2018 dropped 25% compared to the record-setting previous year, but pricing continues to increase, focusing on the top of the market. So says Jon Shelly, PwC’s head of corporate finance in Scotland. He cites a number of the biggest transactions last year:

  • FNZ to Canada-based investment group CDPQ;
  • Weir Group’s Flow Control Division to US-based First Reserve; and
  • Howden to KPS Capital Partners.

Shelly was quoted at a business leaders’ meeting regarding ‘the pressure for corporates to deliver growth together with the wall of capital that is out there.’ In this regard, he’s very much in agreement with most other UK analysts when he concludes that most organisations now need to accept the current uncertain business climate in the face of growth needs and competition for deals from private equity and debt.

Dates for your business valuation diary

ICAEW Practical Business Valuation, 11 and 25 September, and 11 and 25 November, London

IVSC Annual General Meeting and IVAS/IVSC Business Valuation Conference, 7-9 October, Singapore

ACG UK Chapter Trends in Alternative Capital, 15 October, London

ICAEW Excel Modelling—Investment Appraisal, Valuation and Business Cases, 18 October or 15 November, London

ICAEW Annual Business Valuation Conference, 23 October, London

ICAS New April 2019 Corporate Insolvency Rules for Scotland course, 31 October, Glasgow; 1 November, Aberdeen; 7 November, Edinburgh; 15 November, Perth

UK200 Group Annual Conference, 13-15 November, Liverpool


Interested in working with BVR in the UK as a partner or ambassador?
Want to share a news item? Have feedback or comments?

Please contact David Foster (Executive Editor) at:
ukeditor@bvresources.com or +011-917-741-3853


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