RICS is warning the global business community that inconsistent valuations could not only impact their ability to raise finance, but lead to mergers and acquisitions falling through.
The issue is affecting businesses' ability to expand, refinance and in some cases even stay solvent while companies are also making significant losses on pre-acquisition due diligence costs of failed deals.
Determining the value of a business is an increasingly difficult endeavour in times of market instability with valuations dependent upon regularly fluctuating elements.
This is further compounded by the global differences in valuation models and assumptions which leads to inconsistency in business valuation. RICS recognises this issue and is seeking to standardise valuation methods across countries and professions.
RICS will be launching a new business valuation APC route to membership at its Business Valuation conference today.
The conference kicks-off a campaign to raise global awareness of business valuation standards as well as the start of an important year for business valuation which will see the launch of a new edition of the Red Book, Guidance Notes in Business valuation and the valuation of Intangible assets.
Commenting, Phillip Gainey RICS Associate Director of Business Valuation, said:
"We want to bring about global consistency in the understanding and development of business valuation practices by setting a global standard through the International Valuation Standards' aligned Red Book.
"The conference marks the launch of our new business valuation qualification and starts an important debate in which our expert panellists will share their knowledge on the best way to handle market instability, how to deal with the lack of comparable transactions in an inactive market and current trends in managing insolvency and distressed intellectual property.
"The post-financial crisis era is an opportunistic time for the profession with demand increasing for skilled business valuers. As the world's leading professional valuation organisation RICS wishes to support the sector by providing enhanced skills and training for business valuers."
Commenting on what the new APC route means for business valuation, Jim Eales, Global Head of Valuations and Business Modeling at Ernst & Young, said:
"There is no generally recognised qualification or accreditation for business valuers, although many hold professional qualifications as accountants or financial analysts.
"Currently it is surveyors that value real estate and accountants that value intangible assets such as shares and intellectual property, but it is not obvious as to why this should be the case.
"The inconsistency in valuation caused by the lack of a global standard is not only harming businesses' but also the valuation profession.
"We therefore welcome RICS' new business valuation qualification which will help to merge the discipline between professions and for the first time produce specialist business valuers."
