If you are planning on valuing a business in an international setting, consider complying with the International Valuation Standards (IVS). Just about in any jurisdiction where business assets are valued, standard compliance is key and the IVS rules the roost.
One of the key requirements under the IVS is a properly conducted fact finding investigation. Once you state the purpose and scope of your engagement to the business management clients, you would need to gather sufficient information and analyze it to support your valuation conclusions.
A valuer, as the business valuation specialist is called under the IVS standards, is expected to do the needed inspections of the business operations, conduct interviews with the management and key employees, and run calculations to back the valuation results.
Sounds like the analysis paralysis is right around the corner, doesn’t it? A bit of good news – you can set limits on how much investigative effort will be done and communicate this to the clients. Note though, that if the clients try to limit your research in order to save money on the valuation project, you should tell them if the limits prevent you from doing what is needed in order to ensure the valuation holds water.
Don’t cut corners just to please the client. If you think the valuation results are in doubt because you had to skip steps, state so in your valuation report.
The more important the information you use in your analysis, the more attention you should pay to its credibility. Are the sources of data verifiable? Do the people who provided you with the info understand its significance? If you feel the data provided is shaky, do not use it in your analysis or state the potential impact of inaccuracies.
IVS is picky when it comes to independence of your info sources. Generally, there should not be any vested interests either in the company ownership or how the valuation results turn out.
At the end of the day, you should make a call as to whether the info available to you is enough to create a credible valuation. If third party information you can get falls short or can’t be trusted, you need to communicate to your valuation report readers that the IVS compliance requirements were not met.