Nick Talbot, CEO, The International Valuations Standards Council (IVSC), was at the Business Valuation Summit, and spoke to YourStory on valuations, how they are key to investment decisions, and what goes into setting the standards.
The idea of the International Valuations Standards Council (IVSC) is to put in place an international approach to valuation across all asset classes, which is the same in every country, for valuation is the foundation of investor confidence and financial stability.
CEO Nick Talbot is working with the board and other stakeholders to establish the strategic direction of IVSC, and running the day-to-day operations of the organisation.
Nick has spent over 13 years at various firms like Ernst & Young, and KPMG, and later joined The Royal Institution of Chartered Surveyors (RICS) as a Director. At RICS, Nick worked on several international projects advising on markets and other details on investors and investments.
Nick speaks to YourStory in detail about valuation, how it has evolved, and the challenges the organisation faces. Edited excerpts from the interview:
YourStory: How has the valuation of companies evolved and changed over time?
Nick Talbot: While I am no expert in valuation of tech companies, what has essentially happened is there is more experience and focus, the standards which we have for tech companies are what we would have for any company across the world. What you might find is that the risk and reward analysis of a tech company, is different as compared to an older company. There are different factors like profitability, for example. So while a valuation professional will use similar techniques like any other company, their analysis - when they look at risk and reward – includes different angles to decide.
YS: What are the key parameters you keep in mind during company valuations?
NT: It all depends on the purpose and the kind of client. In an ideal world, we would look at the track record of the company, profitability, potential in terms of future growth opportunities, changes in regulations in the industry, and any changes in the macro-economic level in terms of whether they could affect the business. You also look at the historical financial information and compare it to other companies in that sector. One could look at other companies in the same sector that are listed on the stock exchange. You can compare and contrast to help build a portfolio.
YS: What is the kind of work IVSC has done in the past few years?
NT: We basically define the approach that should be used during valuation. We bring in experts from around the world, who form boards, and in turn, raise issues that they face in valuation and the changes that need to be put in place. We also get ideas from around the world and evaluate them all. We encourage inputs and ideas. The standards belong to everyone and ultimately, it is up to each practitioner.
YS: What are the main challenges from a broader organisational perspective?
NT: The main challenges tend to be from a political perspective. Everyone thinks international is everyone else except for them, and everyone believes their country is a special country and there need to be special allowances. The more mature companies look at a more international approach; they accept the fact that they might not get every allowance. If you are an international investor or a bank, what you are interested in is information that is going to underpin the decision that you are making. You want facts, and want to be able to compare those facts, you don't want to understand 195 different approaches to valuation. You want a simple, way to look at things.