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17th October 2024, 6pm – 8pm GMT
Hosts: Dr Magdalena Antrobus, PhD, C.Psychol, CEO (BVIUK) & Mike Blake (BVIUK, HHS)
Facilitators: BVIUK Expert Members: Chris Mercer, Josh Shilts, William Thomsen, Drew Dorweiler
Special Guest: Cristina Chen-Oster (M2M Capital)
Participants: BVIUK Expert Members, BVIUK Accredited Members, BVIUK Professional Members, BV professionals worldwide.
The Business Valuation Institute UK (BVIUK) recently hosted its highly anticipated 4th Expert Summit, a virtual gathering that brought together some of the brightest minds in the global valuation profession.
With participants spanning continents, time zones, and cultural backgrounds, the summit was a platform for deep conversations about the pressing challenges and opportunities shaping the future of business valuation.
Over the course of two hours, the summit tackled four pivotal topics: buy-sell agreements from an international perspective, contributory assets in professional practices, the harmonisation of valuation methodologies across borders, and the transformative role of artificial intelligence.
The discussions were led by seasoned moderators and sparked rich exchanges of ideas, all underscored by a shared commitment to advancing the profession.
The Challenges and Complexities of Buy-Sell Agreements
The first topic, led by Chris Mercer, explored the intricate world of buy-sell agreements—a cornerstone of business valuation that is often overlooked until it becomes a source of conflict. Drawing on his extensive experience, Chris provided a masterclass in the art of crafting agreements that are not only fair but also forward-thinking.
Chris began by explaining the critical role of buy-sell agreements in ensuring smooth business transitions. He described them as the “insurance policies” of the business world—designed to address unforeseen events such as the death, retirement, or departure of a shareholder. However, he warned that poorly constructed agreements could become “ticking time bombs,” leading to disputes, financial losses, and even the collapse of businesses.
The discussion highlighted significant differences in how buy-sell agreements are approached in the UK versus the US. In the US, Chris noted, there is a stronger emphasis on pre-emptively appointing appraisers and specifying valuation methods, whereas in the UK, agreements often rely on broader language that leaves room for interpretation. This contrast sparked a lively exchange among participants, who shared anecdotes and best practices from their respective jurisdictions.
Chris emphasised the importance of clarity and specificity in drafting agreements. He urged participants to anticipate future challenges and to include mechanisms for regular updates to the agreements as businesses evolve. His recommendation to appoint a single appraiser early in the process resonated strongly with the group, as it was seen as a practical way to prevent disputes and build trust among stakeholders.
Contributory Assets in the Age of AI
The second topic, introduced by Josh Shilts, delved into the fascinating and often underexplored concept of contributory assets. These are the intangible and tangible elements—such as workforce contributions, proprietary systems, and intellectual property—that play a vital role in generating a business’s value.
Josh challenged the group to rethink traditional valuation models, particularly in the context of artificial intelligence (AI). He posed a provocative question: “What happens when AI begins to replace what we’ve historically considered contributory assets?” This led to a dynamic discussion about how technology is reshaping not only the way businesses operate but also the way they are valued.
Participants explored scenarios in which AI could significantly alter the perceived value of a company’s workforce. For example, if AI systems automate tasks traditionally performed by highly skilled employees, how should those changes be reflected in a valuation? Josh also highlighted the importance of forward-looking valuation models that account for AI’s long-term impact on capital planning and operational efficiencies.
The conversation took a practical turn as participants shared examples of how they have encountered AI-driven changes in their own valuation assignments. Josh’s call for valuers to “think ahead” and model the potential evolution of businesses over the next decade was met with widespread agreement.
Global Harmonisation: Bridging the Divide
The third discussion, moderated by William Thomsen, tackled one of the most ambitious goals in the valuation profession: achieving global harmonisation of valuation methodologies.
William opened the session by acknowledging the complexities of this endeavour, noting that while harmonisation is desirable, it is far from straightforward.
Participants highlighted the stark differences in valuation practices across regions. In the UK, for example, valuations are often influenced by case law and the specifics of individual disputes, whereas in continental Europe, a more formulaic approach is often favoured. In the US, meanwhile, the emphasis on market-based valuation methods reflects a distinct cultural and regulatory environment.
The group explored the potential for standards like those from the International Valuation Standards Council (IVSC) to provide a unifying framework. However, there was a consensus that such standards must allow for flexibility to account for regional nuances. As one participant put it, “Harmonisation doesn’t mean uniformity—it means finding common ground while respecting differences.”
The discussion also touched on the role of education and training in promoting harmonisation. By equipping valuers with a deep understanding of both global standards and local practices, the profession can move closer to a shared vision of consistency and credibility.
Artificial Intelligence: The Future of Valuation?
The final topic, led by Drew Dorweiler, explored the disruptive potential of artificial intelligence in the valuation profession. Drew began by framing the debate: “Is AI a threat to our profession, or is it the tool we’ve been waiting for?” This question sparked one of the most animated discussions of the summit.
Participants weighed the pros and cons of AI, with many agreeing that while AI can streamline processes and enhance efficiency, it cannot replace the nuanced judgment and contextual understanding that human valuers bring to the table. Drew highlighted specific examples of how AI is already being used in areas such as data analysis, client onboarding, and even marketing for valuation firms.
However, the ethical implications of AI were also a major focus. Concerns about bias in algorithms, data privacy, and over-reliance on technology were raised, underscoring the need for clear guidelines and safeguards. The group agreed that AI’s potential must be harnessed responsibly, with valuers taking the lead in defining its role within the profession.
Looking Ahead: A Call to Action
As the summit concluded, there was a palpable sense of optimism and purpose. The discussions had not only highlighted the challenges facing the valuation profession but also illuminated the path forward.
From crafting better buy-sell agreements to redefining contributory assets, from promoting global harmonisation to navigating the complexities of AI, the summit was a testament to the power of collaboration and innovation.
BVIUK’s leadership in fostering these conversations was widely acknowledged, and participants expressed excitement about the initiatives set to emerge in the months ahead. As one attendee aptly summarised, “This isn’t just about what we do today—it’s about shaping the future of our profession for generations to come.”
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