BVR Logo 7 May 2019 | Issue 2-1

Welcome to the second issue of BVWire—UK! This free service covers the business valuation profession in the United Kingdom and its expanding role in regulatory, fiscal, contentious, and compliance valuations. Twice a month, BVWire—UK delivers news and perspectives from valuation thought leaders, expert practitioners, academics, the High Courts, HMRC, the standard-setters, and more. We’ll also keep you current on new business valuation research, methodologies, data tools, and training opportunities from ICAEW, RICS, BVR, and others.  

BVR is excited to join the UK valuation community! Please be in touch with your perspectives, news, and ideas—and feel free to pass this issue along to any colleagues (complimentary sign-up instructions are here). Thank you for reading!


First meeting on international financial instruments valuation board held in London

Various efforts to set standards for the valuation of financial instruments have been attempted, but ‘investors, regulators, chartered accountants, and the banks are unified since the last financial crisis,’ says Gavin Francis, HSBC’s chief accounting officer in London and past technical director of the IASB. Francis is chair of the newest International Valuation Standards Council (IVSC) division, the Financial Instruments Standards Board, which also includes Raj Brar (Bank of England) and Daniel Kahn (EY), plus many others. ‘Every entity has financial instruments sitting on their balance sheets, from relatively easy-to-value cash through to complex structured derivatives,’ says Francis. ‘Each needs robust, consistent, and reliable valuation standards.’ The IVSC interview with Francis about the goals of the new board is available here.

iiBV releases webinar on international
cost of capital

The International Institute of Business Valuers (iiBV) is expanding their training offerings for business valuators. A new webinar on international cost of capital is now available, featuring an expert panel including Carla Nunes, managing director of Duff & Phelps; Andrew Strickland (Scrutton Bland); and others. ‘Most elements of developing cost of equity around the world have changed,’ says Nunes, ‘even the risk-free rate, which has been lowered since actions by the government banks.’ The webinar includes two helpful case studies for developing a WACC for a local UK company and a multinational business.

ICAEW's 2019 Business Valuation Community Conference scheduled for 20 September

The ICAEW’s annual BV conference has been scheduled for Thursday, 20 September, at Moorgate Hall in London. The agenda is not yet available, but David Franklin (ICAEW) explains that the organising committee is scheduling additional tracks and expanded sessions compared to 2018. BVWire—UK will provide updates and registration details as available, and you can book now at the ICAEW website.

Brand valuation consultancy joins the IVSC

Brand Finance became the first brand valuation consultancy to join the International Valuation Standards Council (IVSC). David Haigh, the firm’s CEO, notes in an IVSC interview that, ‘when Sir David Tweedie valued the Smirnoff brand in 1987, and other brands were put on balance sheets for the first time in the late 1980s, it caused an uproar … many claiming it was creative accounting.’ Many local GAAP and international financial reporting standards have changed as a result, including IFRS 3 (business combinations), IAS 38 (intangible assets), and IAS 36 (impairment reviews), Haigh comments. ISO 10668, the international standard in monetary brand valuation that was published in 2010, is being supplemented by ISO 20671 (available here as of last month). ‘All of these are professionalising the industry, and we at Brand Finance feel it is important for anyone involved in this area to support these initiatives for the benefit of all businesses as well as the valuation profession.’

ICAEW Practical Business Valuation programme begins again this week

ICAEW offers its two-day valuation basics course again beginning 9 May in London (the second day is 24 May). The course is also offered starting 12 June, 11 September, and 11 November. Cost is £1,370, plus VAT.

This small-group workshop introduces established valuation approaches, and the impact of different client, deal, and statutory requirements. Attendees practise what they learn through hands-on Excel-based case studies.

Sample exercises include:

  • Application of market multiples;
  • Control premiums and discounts for lack of marketability;
  • Assembling equity-level and enterprise-level cash-flow forecasts;
  • Cost of capital using the CAPM;
  • Applying small-firm premiums (size/alpha); and
  • Valuing small firms using cost, capitalised earnings, and modified DCF models.

Register for ‘Practical Business Valuation’ here.

How much is business control worth?

A new control premium study published in M&A Review examines 589 takeover premiums of closed European transactions that occurred between 2005 and 2016. The study can help business valuators support their conclusions. Korbinian Eichner (a professor at Hochschule Pforzheim, who previously did corporate valuation work for KPMG in Zurich) examines the substantial impact of both the acquirers’ strategic considerations and target firms’ financial characteristics on the level of takeover premiums, according to the paper. Eichner concludes that ‘although every deal is unique in its own way, there are factors which correlate strongly with historically observable premiums paid.’

New cases suggest British Common Law may be emphasizing 'fairness'

‘Common law is shifting under our feet, so this is an interesting time to do valuations in contentious situations, whether it’s a family or nonfamily situation,’ Andrew Strickland told BVWire—UK recently. Strickland, who follows UK legal decisions carefully in his practice, also spoke on the topic to a group of 80 UK business valuators at last month’s ICAEW business valuation special interest group’s spring meeting. He particularly notes two new High Court cases: Yusef v Yusef and Another [2019] EWHC 90, and McCallum-Toppin and McCallum-Toppin [2019] EWHC 46. The first ‘ground-breaking case has almost shaken me to the core,’ says Strickland, with his usual understated wit. ‘Three brothers run coffee shops in rail stations. The brothers couldn’t work together at all. One of the brothers died, and his widow brought a case that the other brothers were spending excessively,’ he explained. In the end, the court disallowed a buyout discount, ‘and did not even consider whether this was a quasi-partnership.’ Looking to a ‘fairness’ standard, the court found the conduct was unfairly prejudicial not just because of a failure to consider dividends, but also because of excessive director’s remuneration and extensive use of directors’ loan accounts. It concluded a sale at a discounted value would present an undeserved windfall to the purchasing respondents.

BV movers ...

People: Alvarez & Marsal has strengthened their valuation services offering in the London office with the appointment of Martin Drummond, who joins as managing director. Drummond arrives from Grant Thornton and previously spent time at EY and KPMG. He’ll work with Richard Bibby, head of A&M Valuation Services in Europe. The firm has been adding leadership in the UK recently, including Omar Mirza, who now heads the newest office in Birmingham.

Firms: KPMG has hired 50 data gatherers, analysts, and managers in Glasgow for their growing second Managed Services hub (the first is in Leeds). The firm plans to hire another 350 soon to handle bulk due diligence processing and large-scale data analysis in regulatory requirements, complaints handling, customer remediation, and other administrative tasks, says Catherine Burnet, senior partner for Scotland. In March, fellow Big Four firm EY acquired the 1,000-person-strong Thompson Reuters managed services business as part of its legal services business.

Interested in working with BVR in the UK as a partner or ambassador?
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Please contact David Foster (Executive Editor) at: or +011-917-741-3853

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