BVR Logo 9 May 2023 | Issue 50-1

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, BVIUK, 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).

Why doesn’t your DCF analyses always provide the expected results?

The authors of The Footnotes Analyst argue this month that models based on enterprise free cash flow should, in theory, produce the same result as invested capital models. Often they don’t. The application of growth factors in terminal value calculations is one of the major reasons DCF and “residual value” models can differ, they demonstrate in “DCF Version Residual Income: A Difference in Returns.” For example:

[A]ssume high historical investment by a company has resulted in low aggregate return, but this return is forecast to improve because the incremental return on new investment is expected to be much higher. The impact is that invested capital will grow at a lower rate than profit or cash flow and, as a consequence, residual income will grow at a higher rate.

Other factors can affect DCF calculations besides terminal growth rates, the authors demonstrate. They observe that “it is common to base valuations on adjusted rather than GAAP metrics. If income or expense items that are reflected in changes in balance sheet items are excluded from the profit used for residual income, the residual income based valuation will be incorrect.”

What’s your 2023 market risk premium?

Aswath Damodaran (New York University Stern School of Business) has posted his annual “Equity Risk Premiums (ERP): Determinants, Estimation and Implications—The 2023 Edition.” This is Aswath’s 14th update of this work, and, as usual, it provides a detailed picture of ERPs. Damodaran reviews two approaches to estimating ERP: the ex post approach (using historical information) and the ex ante approach, which is forward-looking—though he has always been a strong proponent of the use of the ex ante approach, or “implied” ERPs. Implied ERPs are extracted by examining stock prices today and expected cash flows in the future. Damodaran’s implied ERPs are one of the options available in BVR’s Cost of Capital Professional when estimating the cost of equity.

Pablo Fernandez and co-authors Diego García and Javier F. Acin (all with the IESE Business School in Spain) have also recently updated their survey results for the Market Risk Premium (MRP) and Risk-Free Rate (RF) used in 80 countries. As usual, their update also provides links to previous years surveys, from 2008 to 2022.

Based on U.S.-only responses, Fernandez found an average market risk premium of 5.7% and a median of 5.5%. Not surprisingly, countries such as Ukraine, Argentina, and Venezuela lead all nations, with rates between 23% and 30%.

DealStats now includes saved searches

BVR has released a major update to their flagship private-company transaction database DealStats to help business valuers retain their previous search. Users can now conduct a text search (by title and by notes) in all saved searches. We added the new feature so that you may easily pull up a saved search based on a quick search.

For analysts with extensive saved searches, DealStats also has improved features to sort and find past work. Users can now sort your saved screens by title, date created, or date updated.

Quintile rankings added to leading marketability discount service

BVR is also pleased to announce a new offering for Stout Restricted Stock Study & DLOM Calculator: quintile low/median/high values.

This requested upgrade gives analysts a clear basis for comparing their subject company to low/median/high values based on size, balance sheet risk characteristics, profitability, and market risk.

New IVS Exposure Draft has few changes in business valuation practice

The 2023 IVS exposure draft suggests “online user experience enhancements” but few significant changes for UK business valuers who adhere to the IVSC standards. There are, however, substantial revisions and enhancements to IVS 500 Financial Instruments for analysts with those engagements. The IVSC will also host a series of webinars later in May to discuss the proposed changes.

For business valuers, it’s worth reviewing the suggested additions or expansions to requirements for data and inputs, valuation models, quality controls, and documentation. Most practitioners are already meeting these standards.

Business valuation experts can now submit comments through the IVSC’s online consultation platform or via email to IVSC Technical Director Alexander Aronsohn (

Following the consultation, the next edition of the IVS is expected to be published in January 2024, with an effective date of July 2024.

How much is a celebrity gesture worth?

It isn’t easy to register trademarks for gestures or poses, says a new article, “Celebrity Rights: Body Movements and Signature Poses as Trademarks,” but they can be protected from infringement and generate value. For instance, last summer, athlete Usain Bolt registered his “lightning pose/Bolting” in the European Union. Jay-Z registered the diamond hand signal in the U.S. in 2019. The article also explores how, in 2017, Gene Simmons of KISS fame applied to register the sign of the horns (aka the devil’s horn hand gesture) that he had been using since 1974. He withdrew the application after criticism from the music industry because the gesture is now ubiquitous.

New articles from BVU

The May 2023 issue of the Business Valuation Update is available to subscribers and ready to download. Highlights of the current issue include:

  • “Kick-Starting a CPT Revenue Analysis for a Physician Practice”;
  • “Alerding Gives Some Insights Into AI and BV”;
  • “Industry Updates for Firms Most Impacted by the Labor Shortage”;
  • “One of My Favorite Court Cases Reveals What Makes a Guideline Company—It’s a Classic”;
  • “How One BV Practice Helps Train Its Young Professionals”;
  • “It’s About Time: Webb on Fractional Interests in Real Estate”; and
  • BVLaw Case Update: Koch v. Koch.
Dates for your diary

11 May: BVIUK Expert Exclusive: Innovations and Disruptions in Business Valuation—Staying Ahead of the Curve, virtual, free to BVIUK members

25 May: AICPA FVS Podcast, episode 61: Valuing Crypto Assets and Crypto Currencies (part of AICPA podcast series, some episodes of which are relevant to business valuation)

1-2 June: ICAEW Advanced Valuation Techniques, two days, virtual classroom

8 June: ICAEW Valuation Community Webinar on Valuing Crypto, 13-14:00

7-15 June: IVSC Third Annual Valuation Webinar Series, sponsored by Kroll

20-21 September: ICAEW Valuation Conference, virtual, details to follow

9-11 October: IVSC Annual General Meeting, Paris (concurrent with Rugby World Cup)

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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