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Outlook for Growth in Business Valuation

May 9th 2008
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By Eva Lang - How broad is the current economic slowdown and is it affecting business valuation firms? Two recent items give us some insight into how economic conditions are affecting BV work.

On May 7, 2008, the American Society of Appraisers published in the ASA BV E-Letter, the results of an informal poll of ASA BV practitioners. According to Bill Quackenbush, the editor, 57 percent of the respondents expected 2008 billings to be higher than prior years, and only 6.5 percent thought 2008 would be down in terms of billings. The larger the firm, the more likely billings were expected to be up in 2008. Litigation firms similarly expected growth, but only a little more than other types of practitioners. Those from the Southwest and Mid-Atlantic were the most optimistic regarding growth; those from the Northeast the most pessimistic.

On May 8, 2008, Duff & Phelps Corporation in the first quarter earnings conference call with a number of top analysts, talked about how fair value accounting is driving growth. Duff & Phelps Corporation (DUF) is a publicly traded independent financial advisory company. It operates in two segments, Financial Advisory and Investment Banking. The Financial Advisory segment offers valuation advisory services. Revenues in this segment were up 26% in the first quarter. The segments billing rate rose 3.8% to $326 per hour during the same period.

In this call (transcript available at Seeking Alpha) , CEO Noah Gottdiener started out by noting that growth was “being driven by broad market trends that continue to increase in importance, especially in light of the current economic environment. In particular, the current volatility in the financial markets underscores the need for greater transparency, the move towards fair value accounting, and demands for independence.” He then specifically mentions “major corporate clients are hiring us to value their investment portfolios, particularly with respect to instruments such as auction-rate securities. Our FAS 142 impairment valuation practice, a key component of our valuation advisory services business, continues to see lift in today’s environment. And not surprisingly, litigation appears to be increasing, particularly with respect to valuation and liquidity issues.” Noah went on to state that in terms of long-term growth goals, he expected to see 15% organic growth.

Things continue to look good for the valuation profession with new opportunities ahead despite a shrinking economy.


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