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What does it mean to be independent? Independent of what? The lines of
independence appear to be getting real blurry in the world of
valuation. While the major audit firms have drawn some hard lines, we
still find grey in the rest of the market. Recently, we heard of a
west coast investment bank including a 409A valuation as part of a
debt financing. In other words, they threw in the valuation for
"free". Well, at least they positioned it that way. The mortgage
industry does something similar, "no money down, no closing costs, the
biggest no brainer in the history of earth", of course no one really
talks about how the rate might compare. Sounds like a new floor in
valuation. Yet, maybe the valuation is really worth the explicit price
being paid. Claiming to be an "independent" third party valuation
provider and actually being one are two different things. Of course,
the first and obvious test of independence is whether you actually own
an interest in the company you are valuing. Beyond that a simple
litmus test seems to work quite well, I put myself on the stand in
U.S. Tax court with my client's financial position on the line. Will I
be discredited? Do I have the credentials to defend both my position
and my independence? Could my valuation be colored by other interests
I have in the company? I think we are only beginning to uncover and
define what "independence" really means in the world of finance. Stock
recommendations dependent on investment banking relationships,
auditors dependent on consulting services, valuations dependent on ___?
Might there be a shakeout??? Only time will tell...

Category(s): Valuation Thoughts
Posted by Brett Suchor at 07:08 AM | Permalink | Comments (0) | TrackBacks (0)