BVR Logo 15 September 2020 | Issue 18-2

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, 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).

ICAEW virtual Advanced Valuation Techniques session begins tomorrow

The ICAEW Advanced Valuation Techniques begins again in virtual format Wednesday from 9:15 to 12:30 BT and concludes Thursday 17 September. This leading workshop concentrates on a detailed understanding of the interaction between cash flows, risk, and financing. COVID-19 has somewhat reduced the CPD options available to business valuation experts in the UK.

The course addresses the valuation of early-stage firms and distressed firms and provides an opportunity to explore specialised valuation topics such as:

  • BV model equivalence and an overview of less commonly used models (e.g., EVA, APV, and real options);
  • An enhanced cost of capital process—matching risk-free rate, market risk premium, beta, alpha, and country risk assumptions;
  • Valuing early-stage and distressed firms;
  • Addressing complex cash-flow issues relating to taxes, terminal value models, growth, deferrals, capex, and depreciation;
  • Computation of discounts for lack of marketability and control premiums; and
  • Impact of firm life cycle on leverage, financing choices, and value.

As in the past, the second day offers some flexibility to cover advanced topics at the choice of the participants. At previous workshops, these have included:

  • M&A valuation issues;
  • Private equity valuation model;
  • Valuing options and convertibles;
  • Share-based payments (IFRS 2);
  • Real options analysis;
  • Monte Carlo; and
  • Specialised industries (e.g., extractive industries, valuing financial institutions, renewables).
New IVSC ‘Valuation Providers Platform’ limited to a handful of UK BV organisations

The IVSC have launched a new online search platform designed to ‘allow users of valuation information to search local expertise’ in the UK and elsewhere. At this point, only RICS, Deloitte, Duff & Phelps, and KPMG are included (PwC appears as an expert in Ireland only), so the platform is hardly representative. The stated goal of the Providers Platform is to identify (and to provide contact information for) VPOs, firms, and their leading valuation experts who are well-versed in the current IVS.

BVWire—UK recommends that readers contact the IVSC to get added. (Members may also attend the IVSC Advisory Forum Working Group public meeting on 28 September.) The Providers Platform won’t help the business or user community much if it’s limited to a handful of global firms, and it could be a worthy database and referral source when it becomes more robust and democratic (several of the top global firms have been subject to new sanctions and fines related to their fair value engagements in the last several months, so implying that they’re the sole providers could confuse the market.)

At a time when BT is in play and London judges have required that Goldman Sachs must turn over financial records on the supposedly undervalued €13B Arcelor-Mittal merger, transparency among the best financial analysts and providers takes on new urgency.

In the meantime, the IVSC recognize that ‘this portal is updated regularly and can help users of valuation information access relevant expertise. Please note that this is not an exhaustive list of IVS trained valuers and more information is being added regularly.’ In its current state, this new directory is more misleading than helpful—but it should become more valuable (and perhaps a source of client referrals) as non-IVSC sponsor information is added.

Is COVID-19 changing the types of new
BV engagements?

BVWire—UK discussed this topic with a number of business valuation experts in the UK and North America and discovered a surprising degree of stability, given FTSE risk and overall predictions of GDP reductions in the 7%-to-15% range.

‘Our firm is having fewer surprises than one might expect,’ one valuer said. Her firm continues to see new divorce cases, “though some are settling since different judges have different tolerances for on-line or in-court proceedings.”

Others are still busy with a lot of M&A-related work. ‘We’re seeing a lot of calls from older owners who are saying they’ve been planning for a long time to exit so we’re still seeing “in the pipeline” engagements,’ says a valuer from a Big Four firm. ‘I worry that this pipeline might dry up in a year or two, similar to what happened to the real estate market which stayed stable past 2008 but then dropped off significantly by 2010 during the last recession.’

Another valuer said he’s seeing more requests for estate planning and HMRC work, perhaps taking advantage of any ‘COVID-19 discount’ as a result of the new budget’s lowered tax rates, and prior to future potential increased taxes as the result of bailout expenses or further economic hardship.

Duff & Phelps Cost of Capital Navigator adds international industry benchmarking module

The new international industry benchmarking module (available in late October) provides subscribers with comprehensive global industry-level statistics for approximately 90 industries in four global regions, with data to support valuation dates from March 2015 to the present. (A basic version lacks trend analysis and includes data for the last two years only.).

Analyses are presented in the GBP, and also the euro and USD. Industries are identified by their Global Industry Classification Standard (GICS) code. Industry data include:

  • Cost of equity, cost of debt, and WACC estimates;
  • Performance statistics;
  • Valuation multiples;
  • Levered and unlevered betas;
  • Capital structure; and
  • Company lists.

Business valuers and financial analysts can order the international industry benchmarking module here.

Fourth annual Asian Business Valuation conference 6-7 October

In its fourth year, Asia’s leading business valuation conference is back with the theme ‘Crisis and Sustainability: The Search for Enduring Value.’ Like everything else, it’s virtual, so UK valuers can attend if they’re willing to change their sleeping habits for a few nights.

Topics of discussion include the valuation of data, ESG factors, intangible assets, and a master class by Professor Aswath Damodaran. The programme can be found on the conference website. Members and sponsors of the IVSC can receive a complimentary seat. Register for your seat for the three conference sessions via the respective links below as soon as possible:

Pablo Fernandez discusses the need for iteration with many DCF analyses

The new article, ‘Valuing Companies by Cash Flow Discounting: Only APV Does Not Require Iteration,’ may be downloaded at

Fernandez, professor of finance at IESE Business School, argues that the most used methods for valuing companies by DCF include:

  • Equity cash flow;
  • Free cash flow;
  • Capital cash flow; and
  • Adjusted present value (APV).

Only APV does not require iteration, he argues. And, he says, ‘[A]ll four methods, if properly applied, always give the same value. Many valuations are incorrect because the authors do not iterate and, therefore, the four methods do not provide the same value.’

Dates for your diary

16-17 September: ICAEW Advanced Valuation Techniques, 9:15-12:30 BST both days, virtual event

28 September: IVSC Advisory Forum Working Group public meeting, virtual event

6-7 October: IVAS-IVSC Business Valuation Conference 2020

6 October: IVSC AGM Panel, The Big Picture: Economic and Market Outlook (Zoom)

7 October: IVSC AGM Panel, Emerging Trends in Retail Valuation (Zoom)

8 October: IVSC AGM Panel, Accounting for Internally Generated Intangibles (Zoom)

12-13 October: American Society of Appraisers International Conference, virtual event

29-30 October: EACVA 14th Annual Business Valuation Conference, Munich

29-30 October: ICAEW Excel Modeling—Investment Appraisal, Valuation and Business Cases, virtual, 9:15-12:30 BST (repeated live 4 December)

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David Foster at

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