What were the most significant BV developments in 2014? What can we expect for 2015? BVWire posed these questions to the editorial advisory board of BVR’s Business Valuation Update. Here are a few comments.
“Last year witnessed a growing skepticism of the capital asset pricing model in academia and elsewhere,” says Ted Israel (Eckhoff Accountancy Corp.). “It’s as if CAPM is cowering in the castle while the villagers assemble outside with torches and pitchforks.” However, he says nothing better has come along—yet. “Dohmeyer, Butler, et al. have offered up the implied private company pricing line, which is interesting but needs more vetting (and they invite it). All of this leaves the practitioner in a quandary over what to do.” Looking ahead to the rest of 2015, Israel says: “I think we better arrive at some consensus about the cost of capital.”
Speaking of cost of capital, the introduction of Duff & Phelps’s Valuation Handbook – Guide to Cost of Capital was a major advance, according to Ron Seigneur (Seigneur Gustafson LLP CPAs). “While many thought we would have a gap with respect to cost of capital information, Duff & Phelps has more than filled that gap. It provides solid information and is very well organized.”
Seigneur also points out that the changes in estate tax limits have “resulted in less than 1% of U.S. taxpayers being exposed to estate tax.” As a result, he says the need for estate tax-related planning valuations has subsided, especially after the surge BV practitioners witnessed at the end of 2012 and into 2013. “Those who focus on this work see softness in their work flows.” Seigneur sees 2015 as busier than ever with litigation work and M&A engagements. “As long as the current ‘irrational exuberance’ in the stock market lasts, we will all be busy—or should be."
For more comments, see the Jan. 7, 2015, issue of BVWire, a free weekly ezine.