Business valuation took a back seat to forensics in the new judgement from the High Court in the Akhmedova family drama, this time in a claim against the husband (Farkhad) and the son (Temur) who went out of their way to create “dishonest schemes” to place identified assets in jurisdictions beyond the reach of the UK courts or the wife (Tatiana). In this new chapter of the story that began with a filing 30 October 2013, Mrs Justice Knowles concludes that Temur “is a dishonest individual who will do anything to assist his father,” and the intermediaries are crooks: “I reject Borderedge’s claim that it acted in good faith.”

As widely reported, insolvency principles also played a role, since the original trust intended to pay the first 2016 judgement was emptied, so Ms. Akhmedova’s experts sought relief by requesting that asset transfer transactions be stopped under the UK Insolvency Act of 1986.

The financial experts in the new case (Akhmedova v. Akhmedov [2021] EWHC 545 (Fam)) had to unravel new Panamanian, Cypriot, and Liechtensteinian trusts, shell companies, and wealth transfers to London-based Temur, but there was relatively little doubt about the actual value of the super-yacht Luna, the art, the Cape Ferrat real estate, or the hidden cash. (It’s been reported widely that the battling ex-spouses had reached a settlement at about a third of the original judgement, so this decision may not be enforced.)

Justice Knowles quotes Tolstoy (“all unhappy families …”), which seems relevant to the application of professional standards in this case. Business valuers are obligated to search for independence and objectivity to achieve a standard of value that’s “fair.” It all goes for naught when contentious parties are more interested in hurting one another than they are in settling a financial dispute.

Duff & Phelps have grown to about 4,800 employees in 30 countries, with a leadership presence in the UK. Much of the growth has been through financial services acquisitions completed by its various private equity owners, including Kroll in 2018. The BV community have watched as Duff migrates its brand. Their goal is to eliminate the Duff & Phelps brand by January, so business valuation in the UK will continue to have a perceived BV “Big Five,” now including Kroll.

Duff have been such a mainstay for most in the profession that perhaps there will be a forgiveness period while everyone gets used to the new name.

Financial executives in the UK and EU are more likely to know that business valuation has its own set of professional standards. Over 80% of those surveyed in “On the Role of Business Valuation Standards From the Perspective of End-Users” agreed with this statement. The same percentage believe that valuations prepared according to some international standard (whether from RICS, the IVS, or elsewhere) help resolve business conflicts. Both of these results are much higher than those derived from similar earlier surveys.

The study (reposted with permission on the IVSC website), published in Bewertungs Praktiker and written by Marc Broekema (Amsterdam), Olesya Perepechko (St. Petersburg), and Klaus Rabel (Graz), offers hope that the BV profession continues to gain independent recognition in wider business circles. Many (72%) of the financial executives surveyed are current enough with professional issues to recognize that the lack of one uniform global standard can create differences in valuation metrics, particularly in the areas of:

• Valuation approaches and methods;

• Estimating the discount rate; and

• Estimating the long-term growth rate.

The respondents were less concerned with contradictions between, say, the new TEGoVA European standards and the BV components of IVS than they were that their business valuers were complying with some relevant standard. Perhaps what’s most noteworthy is that these business users of valuation services recognized that multiple BV standard-setters exist. That was not true a decade ago.

The founders of a financial advisory firm sold most of their holdings to a competitor but retained some shares and continued as directors and employees under a new shareholder agreement. Less than a year later, two of the founders were dismissed and required to sell their remaining shares under the “fair value” transfer mechanism in the acquirer’s articles of association. Unfortunately, the mechanism was described differently in the articles of association than it was in the shareholder agreement.
Most business valuers know this is treacherous territory. A new decision by the High Court (Lord v Maven Wealth Group Ltd [2021] EWHC 2544 (Comm)) shows a willingness to follow the precise language of the articles of incorporation to resolve disputes. In the end, the court “held that the fair value of shares to be sold by departing directors under a compulsory transfer mechanism could not be calculated using a mechanism in a private contract,” wrote Robert Boyle and Dominic Sedghi of Macfarlanes LLP in their thoughtful analysis of the decision.

Experienced business valuers would advise their clients to avoid divergent definitions of fair value in any agreement, but, unfortunately, this review did not happen in the Lord v Maven Wealth Group case:

• One document had a binding mechanism if others failed; the other did not;

• The last recourse varied between the two documents; and

• One required that the parties attempt to agree between themselves before initiating a dispute; the other deferred the matter immediately to outside auditors.

The court said, in this case, the procedure in the company’s articles applied. As Boyle and Sedghi comment, “It is common for different documents in a single transaction to cross-refer to and ‘borrow’ definitions from each other.… However, it is important to ensure that any borrowed terms fit properly with the relevant document and do not contradict any express terms and not to resort to ‘lazy’ cross-referencing.”

This year’s annual general meeting (AGM) of the International Valuation Standards Council (IVSC) will be held as a virtual program from 21-28 October. The full agenda is now available, and you can see it if you click here. Many parts of the program are open to members of IVSC sponsor/member organizations or their representatives (such as RICS, ACCA, or ICAEW). Working groups focus on standards and policies for business valuation, financial instruments, and intangibles, among other topics.

21-28 October: IVSC Annual General Meeting, virtual

24-26 October: ASA International Conference, Las Vegas and online

8-11 November: IMAA’s Damodaran on Valuation, live and online

1-9 December: Practical Business Valuation, ICAEW live and online (four sessions) 09:30-12:30 BT

3-5 October 2022: 12th Annual International Valuation Conference, Riyadh, Saudi Arabia

Want to share a news item? Have feedback or comments? Please contact David Foster at ukeditor@bvresources.com.

Want to share a news item? Have feedback or comments? Please contact
David Foster at ukeditor@bvresources.com.