David Nissen is a partner in Mueller & Co., a 90 person firm in the Chicago area, which recently acquired the 10 person Nickels, Beilman & Co., Aurora, Illinois, a business valuation practice. He says it is worth knowing the value of a small business, which, unlike real estate, has no comparables. The need to know the values of small businesses will not change.

Business valuation ranked number five in Accounting Today’s poll of the top 100 firms to determine the most popular niches.

In the National Association of Certified Valuation Analysts’ poll in 2004, 68 percent of respondents forecast more than 10 percent growth in their consulting practices. This poll also provided the following information on reasons for valuations:

Estate, gift, and other taxes	33%
M&A, IPO, reorganization, bankruptcy, franchise	18
Litigation, including divorce	44
Banking, insurance, stock options, fairness opinions	05

Factors affecting the future:

• Baby boomers—the oldest boomers are in their 60’s now. Dennis Roberts, chairman of The McLean Group LLC, estimates $15 trillion in transfers of businesses in the next 10 to 14 years.
• Private equity groups (formerly called venture capitalists) increased their investments in the middle market from an average of $30 billion a year for the five years ending in 2004, to $175 billion in 2005.
• The strength of the economy in the last few years has provided cash and incentive for companies to make acquisitions.
• Users of valuation reports are becoming better educated, and expect better valuation reports.
• FAS Nos. 141 and 142 require testing of standards, and annual determinations of goodwill impairment.
• Financial reporting requirements are expected to increase the need for valuations.
• Companies sold for as much as 12 times earnings in the 1990’s. Comparable companies are selling for 4 to 5 times earnings today.
• The valuation business is becoming more industry specific.

The AICPA members who have become Accredited in Business Valuation now number 2000, compared to 1500 in 2003. The AICPA and other accrediting organizations are discussing a North American business valuation credential. According to Roberts there are three markets for business valuation services with each accounting for about 1/3d of the business:

• Private equity groups and hedge funds.
• Strategic buyers.
• Offshore transactions.

Given that globalization is already a major phenomenon, a unified valuation credential makes sense.

From Accounting Today, June 5, 2006, SourceMedia Inc., One State Street Plaza, 27th Floor, New York, NY 10004. For the complete article, click on the following link: http://www.webcpa.com/article.cfm?articleid=20382&;pg=acctoday.