BVR Logo 3 March 2020 | Issue 12-1

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, 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).

New report from PKF International on valuation concerns for the UK (and global) cannabis markets

Several estimates place the growing cannabis market at over £30 bn. The UK’s portion of this growth has been challenged by Brexit, of course—similar to every other industry with significant regulatory controls.

In addition, ‘one challenge that does seem particular to cannabis companies is gaining a listing on a recognised stock exchange,’ says the new analysis ‘Cannabis: An Industry Growing in Every Sense,’ from PKF International (PKFI).

The UK Listing Authority (UKLA) is renowned for its robust requirements and still appears to be somewhat sceptical about the industry. While the kudos of a London Stock Exchange (LSE) listing appears some way off, two companies [Anada Developments and Sativa Investments] are enjoying success on the UK-based NEX Exchange.

PKFI comments that ‘Ananda has purchased a stake in an Israeli company focused on improving CBD and THC extraction techniques, while Sativa has invested in two Canadian-based pharmaceutical cannabis companies, Veritas and Rapid Dose Therapeutics.’


FactSet/BVR release their top transactions report for 2020

The new annual FactSet Mergerstat Review delivers comprehensive rosters and statistics on M&A between UK, U.S., and global privately held, listed, and cross-border enterprises. And, as always, the Review is the most reliable source for both control premiums by year, and industry multiples.

Data for each annual edition is sourced from FactSet Mergerstat global mergers and acquisitions data—and all of it is verified by expert analysts.

The 2020 FactSet Mergerstat Review will be available in April for £450 plus shipping, which includes:

  • Summary data on the top 100 deals worldwide;
  • New tables analyse metrics of the top 20 UK deals;
  • Additional tables are now included for top deals in Canada, Latin America, Asia, and the EU;
  • The annual update captures 20 years of historical M&A data and reflects the most up-to-date snapshot of the FactSet Mergers & Acquisitions database;
  • The popular industry metrics section is included again this year;
  • Top 100 global deals summary;
  • Details on premiums paid over the targets’ enterprise values; and
  • Details on private equity transactions and activity, including unit divestitures, management buyouts, and certain asset sales.

The FactSet Mergerstat Review helps analysts guarantee they never omit a major comparable transaction and is one of the most referred-to sources of industry pricing, premia, and payment terms. Each annual subscription includes current updates via the Mergerstat Monthly Review.

Two valuable free video resources available for BVWire—UK readers

Michael Badham, executive director of the International Institute for Business Valuation (iiBV) alerted BVWire—UK that their panel discussion on valuing financial instruments has become their single most popular program, reaching 10,000 views last week. It’s a worthwhile discussion between Justin Burchett, managing director, Stout New York; Srividya Gopalakrishnan, managing director and Southeast Asia Leader, Duff & Phelps, Singapore; Kumar Dasgupta, technical director of financial instruments, IVSC London; and Nicolas Burdeau, partner, Deloitte, Paris. The iiBV’s Valuing Financial Instruments webcast is available here. The International Institute of Business Valuers provides training on business valuation topics for accounting, consulting, and valuation professional organisations. Contact Michael Badham for information on these options.

In addition, the IVSC have released a free webinar panel discussion covering key issues in the ongoing debate about the treatment of acquisition-related goodwill. Accounting rule makers across the globe are slowly reviewing the idea of ending the current goodwill impairment model and reverting back to amortisation. A panel of international business valuation experts discussed this during the IVSC’s Annual General Meeting in Singapore. A 54-minute video of the discussion is now available, with Andreas Ohl (PwC), Kevin Prall (BDO), Eugene Hsiao (CFA Institute), Tatsumi Yamada (IVSC), and Wiley Pun (Savills).

As reported in BVWire—UK previously, the IVSC have put out two exceptional papers on this matter. The first paper concludes that goodwill is not a wasting asset, a conclusion supported by empirical evidence. The second paper concludes that, while the current impairment model’s ability to predict future performance has been inconsistent, reverting back to amortisation would only make matters worse.

Exposure draft on valuing inventory open for comments through 30 April

The IVS 230 Inventories Exposure Draft was issued last week and is now in consultation for two months until 30 April. The IVSC hope to distribute this Exposure Draft widely to stakeholders throughout the BV profession, since inventory valuations emerged as one of six “gap” areas based on the IVSC’s 2017 research.

The project has been led by the Business Valuation Board, with leadership from Mark Zyla (chair, IVSC Standards Review Board), Andreas Ohl (chair, IVSC Business Valuation Board), and Kevin Prall (technical director, IVSC Business Valuation Board).

Depending on feedback received as part of this consultation process, the IVSC boards would propose issuing a final standard for IVS 230 Inventory in mid-2020, with an effective date no earlier than January 2021.

Valuation of inventory is, of course, most frequently conducted for financial reporting purposes as a result of business combinations. The Exposure Draft outlines two common methods for valuing inventory for these purposes: the replacement cost method (the “bottom-up method”) and the comparative sales method (the “top-down method”).

Pablo Fernandez headlines ICAEW Business Valuation 2020 event on 28 April

Subscribers to BVWire—UK might wish to sign up for the just-announced Business Valuation 2020 programme in two months. The date for the meeting was advanced to the spring due to the institute’s meeting-room renovation plans.

This year’s star-studded speaker list includes Professors Pablo Fernandez and Ian Cooper, Andrew Strickland and Luke Morris, Vivek Mehan, HMRC’s SAV assistant director Steve Thomas, Jim Harrington from Duff & Phelps, EY’s chief UK economist Mark Gregory, and more.

Members of IVSC Europe Board Announced

The IVSC announced its intention to form a valuation board with specific focus on issues related to European practitioners and valuation professional organisations (VPOs) last October.

Yann Magnan, chair of the new board, announced that the process has now been completed and the initial IVSC Europe Board members attending the group’s first meeting are:

  • Yann Magnan (Chair);
  • Karthik Balisagar—managing director, economic and financial consulting, FTI Consulting;
  • Giampiero Bambagioni—urban economist and bureau member of the UNECE Committee on Urban Development, Italy;
  • Frank Bollmann—managing director, Vossius & Partner;
  • Marc Broekema—partner and co-founder, BFI;
  • Thomas Dimopoulos—founder and director, AXIA Chartered Surveyors;
  • Jesús Federico Valero Gil—head of Economics, Valuation and Modelling Practice, Deloitte;
  • Wolfgang Kälberer—member of the Steering Committee, HypZert GmbH;
  • Christian Luft—head of Pan-EMEA Valuation, JLL;
  • José Manuel Gómez Miguel—advisor, Spanish Association Value Analysis;
  • Olesya Perepechko—vice president, Russian Society of Appraisers;
  • Klaus Rabel—chair of the Business Valuation Working Group, Austrian Chamber of Public Accountants; and
  • Javier Zoido—managing director, Iberia Valuations Leader, Duff & Phelps.
Two new resources for 2020 UK ERP, risk-free rate, and other indicators

Pablo Fernandez, professor of finance at the IESE Business School, is surveying business valuation professionals in the UK to determine what cost of equity assumptions they are using for 2020. Please complete this short form and email to Professor Fernandez. Those who reply will receive the results in the next month.

1. The market risk premium (equity premium) I am using in 2020 for the UK is: _______ %

Other countries:

for________ is: _______ %
for________ is: _______ %
for________ is: _______ %
2. The risk-free rate that I am using in 2020 for the UK is: _______ %

for ________ is: _______ %
for ________ is: _______ %
for ________ is: _______ %

Meanwhile, free 2020 country-by-country equity risk premia, sovereign credit default swap (CDS) spreads, government bond rates, and risk-free rates by currency and synthetic risk-free rates (with inflation rates by currency) are available from Aswath Damodaran (New York University Stern School of Business). He finds an implied ERP for the UK of 5.69% and for Ireland of 6.04%. Links to the spreadsheets are in a blog post in which he looks at two variables, country and currency, that are ‘often conflated in valuation, perhaps because risky countries tend to have volatile currencies, and separated the discussion to examine the determinants of each, and why they should not be lumped together,’ he writes.

Business valuation CPD diary

ICAEW Practical Business Valuation, 16-17 March, London; 14 and 26 May, London; 9 and 29 July, London; 9 and 19 November, London

HMRC Shares and Assets Valuation Fiscal Forum, 26 March (rescheduled), London

ICAEW Business Acquisition & Due Diligence, 22 April, 24 September, 25 November, London

ICAEW Annual Valuation Conference, 28 April, London

73rd CFA Institute Annual Conference, 17-20 May, Atlanta

Advanced Valuation Techniques, 11 June, London; 16 September, London

ASA-Europe Business Valuation Conference, 24 September, Prague (details available soon)

IVSC Annual General Meeting, 14-16 October, Chicago

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

Our thanks to Marianne Tissier, Andrew Strickland, and Nick Talbot for their valuable contributions to BVWire—UK.

Want to share a news item? Have feedback or comments? Please contact
David Foster at or +011-917-741-3853.

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