BVWire Australia Issue #3-1 | 1 October, 2014

 

Damodaran cautions appraisers on pricing versus valuing

Always an exciting and interesting speaker, Dr. Aswath Damodaran (New York University, Stern School of Business, U.S.A.) conducted a special three-hour workshop on price versus value recently. His key point is that business appraisers should look carefully at their work to clarify the distinction between pricing and valuing a business or asset. Damodaran feels there is a growing difference between price and value, which leads appraisers to use the wrong toolkit 80% of the time, he told the audience (both live and via webcast).

Masquerade: Damodaran also points out that many pricing decisions only pretend to be valuations. For example, the bankers recently put a price on Alibaba of $155 billion. The illusion that this price came out of a valuation model creates a great deal of confusion. In reality, says Damodaran, what they did was set an IPO price. Another example is DCF “valuations” that rely on EBITDA multiples at terminal value. He calls these “valuations in drag” and worries that any “valuation” that relies on terminal value calculation is price-oriented.

Dr. Damodaran had a lot more to say. If you’d like to purchase a recorded version of the webcast, click here.

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Lively debate over a global BV designation

The business valuation profession is at a crucial point in its relatively young life. Has the time come for a global BV designation or accreditation? What would it look like? What are the alternatives? How would key issues be handled: education, certification process, experience, continuing education, discipline? What will the interplay be with this new setup and current designations from existing players?

The International Institute of Business Valuators (IIBV) and Business Valuation Resources (BVR) are hosting "A Lively Debate on Global Business Valuation Education" on 23 October in Toronto, Canada. It will take place immediately following the IVSC’s annual general meeting. A panel of global BV educators will debate the issues and challenges in the design of a global BV designation and accreditation system.

Mary Jane Andrews, chair of the IIBV, will introduce the event. The moderator of the panel is Andy Dzamba, BVR’s executive editor. The panelists include:

  • April Mackenzie—chief executive officer of IVSC;
  • Ben Elder—global director of RICS Valuation and EQS;
  • Bob Morrison—chair of ASA Business Valuation Committee and chair of IIBV Education Committee; and
  • Doug McPhee—global head of KPMG BV education.

This is a free event—there is no charge to attend the session. If you can’t make it, the event will be webcast live. For details, click here.

In the meantime, join in on the discussion of this topic on BVR’s LinkedIn page.

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RICS delivers international business valuation training on digital platform

Valuation professionals from around the globe can now earn a certificate in international business valuation using the Royal Institution of Chartered Surveyors (RICS) distance learning platform.

The Certificate in Business Valuation Techniques course was designed to support the business valuation pathway to membership, incorporating identified professional and technical competencies. "RICS membership enables business valuers to appraise assets in New York, Sydney, Dubai, Hong Kong, or anywhere else in the world using the highest quality international standards and market resources to support their services," says John Barton, CPA, ASA, MRICS, the course developer and instructor.

The 24-week program will be offered twice in the next 12 months, starting on 15 October 2014 and 15 April 2015, and will involve about 300 hours of learning over the six-month period. The online training platform utilises a combination of readings, voice-recorded slide presentations, discussion forums, instructor-led live online sessions, an integrated case study, and final quiz to guide participants through the core principles of business valuation and the fundamental valuation methodologies used in the profession. For more information or to register, click here.

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Five common errors in business valuation

Unrealistic cash flow projections head a list of common errors made in business valuations, according to Howard Johnson, managing director of Veracap M&A International Inc. and Campbell Valuation Partners Limited in Canada. In an article, Johnson explains this and the other common errors he sees: reliance on the multiple of EBITDA methodology, reliance on comparable company multiples, technical errors in rates of return and valuation multiples, and missing the balance sheet.

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Don’t miss the October 2014 issue of Business Valuation Australia

The October 2014 Business Valuation Australia (subscription required) is filled with the industry news you need to stay at the centre of the business valuation profession. Here is what you’ll find in our latest issue:

  • Conference Preview and Advice From BV Thought Leaders (BVR Editor). A preview of the 2014 Chartered Accountants Australia and New Zealand Business Valuation and Forensic Accounting Conference, which starts 27 October in Sydney. Hear what the conference will entail and get advice from conference headliners Mel Abraham and Richard Stewart (PricewaterhouseCoopers).
  • What to Do About Applying Size Premia in Australia (Matthew Ashby, Ferrier Hodgson). The author provides an overview of the current status of the size effect and size premia in Australia, examples of cases from Australian courts and tribunals in which size premia have been considered, and the issues and challenges faced in estimating size premia within the Australian market.
  • 2013-2014 IPO Market Analysis: Australia and New Zealand (Clive Cooper and Vickesh Mistry, S&P Capital IQ). Analysis (as of March 2014) of the IPO market in Australia and New Zealand.
  • Key Valuation Issues Arising in Family Law Valuation (Trevor Vella, Trevor Vella & Co.). The author gives his insights on and the pitfalls of valuation in the family law context in Australia.
  • Valuer’s Q&A Corner (Bob Morrison, Morrison Valuation & Forensic Services). The author provides practical answers to using discount rates when valuing intangible assets.
  • Five Tips That Will Enhance Your Valuation Analysis (Bob Morrison, Morrison Valuation & Forensic Services). This article provides business valuation analysts with five suggestions that will help improve the quality of their valuations.

To read these articles, see the October issue of Business Valuation Australia (subscription required).

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Help wanted: Answer these survey questions for a discount on BVA

BVWire—Australia is pleased to continue the conversation among business valuation practitioners about important and thought-provoking topics. Click here to participate in our latest industry survey to tell us what you think the business valuation profession in Australia and New Zealand needs the most to improve its offerings to clients.

Have you completed our other surveys? This is your last chance before we report the results. To participate in our industry survey on the highly anticipated company tax rate cut, click here. For the second survey, about discount rate adjustments, click here.
Participation in these surveys makes you eligible for a discount on a Business Valuation Australia subscription.

BVWire—Australia will report on the outcomes of all three surveys soon!

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We welcome your feedback and comments. Contact the editor, Sonia Nair, at editorau@bvresources.com.

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In this issue:

Damodaran on pricing
vs. valuing

Global BV designation

RICS online BV training


Five errors in BV

October BVA

Take BV survey now


 

 

 

 

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