Academic journal article Journal of Accountancy

Sharpen Your BV Research Skills

Academic journal article Journal of Accountancy

Sharpen Your BV Research Skills

Article excerpt

One of the most common mistakes inexperienced valuation analysts make is to wait too long to research general industry and economic trends that might affect the value of a business, and then drop the findings into the final report without any discussion of how they relate to the valuation conclusion. Here's a guide to sources of information in print and online that will help give you a thorough understanding of the business landscape your clients are considering.

[] Determine in advance what information you need.

[] Identify the key words or topics you are researching. List synonyms, considering how an online database might phrase things. For the travel industry, for example, you also might search on "tourism."

[] Develop a standard research form to include with every valuation report. List keywords, industry name, Standard and North American Industrial Classification (SlC and NAICS) industry codes (available at oshstats/sicser.html and, respectively), top public companies in the industry and leading trade publications.

[] Seek answers to the following questions:

[] What are the prospects for growth?

[] What are the industry's dominant economic traits?

[] What competitive forces are at work, and how strong are they?

[] What are the drivers of change in the industry, and what effect will they have in the short and long term?

[] Which companies are in the strongest and weakest competitive positions?

[] What key factors determine success and failure?

[] How does the profitability of the industry as a whole compare with that of other industries?

[] How large is the industry?

[] Is the number of large players growing or shrinking?

[] Is merger and acquisition activity increasing or decreasing?

[] What are the barriers to entry?

[] Is the customer base growing or shrinking?

[] What key external factors (interest rates, inflation, new technologies, legislation or regulation) are likely to affect the industry? …

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