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2Business Valuation Market Study 2017 |

Content

Executive summary…………………………………………..3Profile of respondents …………………………………....….5Purpose of valuations…………...........................................6Valuation process and trends………………………………..9Looking forward: A peek into the future…………………...16

The 2017 Business Valuation Market Study is jointly conducted by the Institute of Valuers andAppraisers, Singapore (IVAS) and Ernst & Young Solutions LLP (EY).

2 | Business Valuation Market Study 2017


Executive summary

BackgroundWelcome to the 2017 Business Valuation Market Study, a survey jointly conducted by the Institute of Valuers andAppraisers, Singapore (IVAS) and Ernst & Young Solutions LLP (EY).

Our inaugural survey in 2014 focused solely on the views of Singapore executives. This year, we have broadened thesurvey to include other ASEAN countries. With the formation of the ASEAN Economic Community in 2015, thissurvey is timely; it will provide insights on valuation practices across ASEAN including valuation parameters andapproaches, key challenges faced by valuation professionals, and the outlook for valuations in ASEAN.

We trust that this survey will fill the information gap on fundamental valuation issues professionals in the region faceand contribute to the development of valuation practices in ASEAN.

EY and IVAS would like to thank the following organizations for supporting this survey: The Association of CharteredCertified Accountants, CPA Australia, CFA Society of Singapore, Institute of Chartered Accountants in England andWales, Institute of Singapore Chartered Accountants, Investment Management Association of Singapore, andSingapore Venture Capital & Private Equity Association.

About the surveyWe have captured the views of 205 respondents across a wide range of industries. The survey questions werecirculated through the networks of various professional organizations and bodies.

The survey questions broadly cover:

► Purpose of valuations► Respondents provided the valuation purpose, asset classes valued, and level of valuation complexity

they encountered for each asset class over the last three years.

► Valuation process and trends► Respondents were surveyed on the valuation approaches they frequently adopt and the typical way

they conclude their valuations.► Respondents were also asked about their adopted practices and challenges faced under the valuation

approaches.

► Looking forward: A peek into the future► Respondents weighed in on the future of valuations, essential skills to remain relevant, and key drivers

of valuation growth.


Executive summary

Summary of highlightsThis survey highlights the similarities and differences of valuation practices across ASEAN.

Survey highlights

► Purpose of valuations across ASEAN is driven by each country’s economic, legislative, and regulatoryenvironment. Valuations for litigation or dispute resolutions and tax compliance are less common than financialreporting and transactions. However, respondents from Indonesia have the most experience with valuations for taxcompliance while those from Singapore have the most experience with valuations for litigation or disputeresolutions (pages 6 and 7). Respondents also identified mergers, acquisitions, and disposals or takeovers, inaddition to financial reporting, as the top two drivers for valuations over the next three years (page 21).

► The preferred way to conclude a valuation is to cross-check the value from the primary approach withanother approach. Less common approaches adopted by respondents include averaging valuation results fromdifferent approaches or using just one valuation approach (page 9).

► The most significant challenge in a valuation is the estimation of cash flows. There appears to be less fussover the ubiquitous WACC (weighted cost average cost of capital), which is attributable to an increase in theavailability of data, knowledge, and familiarity with how the WACC is built (page 10).

► Earnings before interest, tax, depreciation and amortization (EBITDA) multiple, the winner. Revenuemultiple, the dark horse. The EBITDA multiple came out tops among the many possible multiples that can beused when adopting the Market Approach, a surprising move away from the formerly popular price/earnings (P/E)multiple. The revenue multiple snuck into second place, and we believe this can be explained by technology start-ups becoming commonplace across ASEAN (page 14).

► Respondents have displayed a keen awareness of sector and industry specific market multiples, which arepreferred over traditional multiples that focus on earnings and book values when valuing businesses in specificindustries (page 15).

► Survey respondents identified the collection and analysis of all relevant information as one of the top threechallenges in the valuation process and technology as the next industry focus; interestingly, data analytics isslowly gaining traction as an essential skill (pages 16, 17 and 21) across ASEAN, although we note thatIndonesian respondents selected data analytics as one of the essential skills.



Profile of respondents

Organization revenue

D1: Which country are you based in?Geography base

D3: What is the size of your company in terms ofannual revenue?

Industry focusD4: Please select the industry you primarily work on:

Others include:- Professional services- Private equity- Power and energy- Plantation and agribusiness- Infrastructure

D2: Which of the following best describes you?Primary role of survey respondents

A total of 205 respondents took part in the survey, ofwhich 52.2% are from Singapore, 16.1% fromMalaysia, 14.1% from Indonesia, and 16.3% fromother ASEAN countries including Thailand, thePhilippines, Vietnam and Brunei (Figure D1).

Practitioners in professional services accounted for55.6% of survey respondents, followed by corporatefinance professionals and investment professionalsat 28.3% (Figure D2).

Most respondents (46.5%) came from organizationswith annual revenues of US$10m-1b, followed by<US$10m (28.2%), and >US$1b (25.2%)(Figure D3).

Survey respondents have worked across variousindustries, with Financial Services being the primarysector that respondents are from (Figure D4).

52.2%

14.1%

16.1%

17.6%

Singapore Indonesia Malaysia Others

63.2%

100% 96.3% 100% 100%

36.8%

3.7%

0.0%

10.0%

20.0%

30.0%

40.0%

50.0%

60.0%

70.0%

80.0%

90.0%

100.0%

Valuationpractitioner

Others Buy-sidecorporatefinance

professional

Investmentmanager or

analyst

Sell-sidecorporatefinance

professional

Non-certified practitioner Certified practitioner

45.9%

24.9%

29.3%

US$10m-1b >US$1b <US$10m

18.3%

31.2%

27.2%

5.4%

Automotive & TransportationConsumer Products & RetailFinancial ServicesGovernment & Public SectorHealth & Life SciencesInsuranceMedia & EntertainmentMining & MetalsOil & GasOthersReal Estate, Hospitality & ConstructionTechnologyTelecommunications


Purpose of valuations

D5: Over the last three years, how often have you been involved in valuations for each of the purposes mentioned below?Frequency of valuations

What has been keeping our respondents busy?

D6: Geographical location of the respondents who performed transaction and financial reporting valuations more than10 times over the last three years.

Figure D5 highlights financial reporting as themain purpose for valuations over the last threeyears. More than 39% of respondents from allgeographical locations have performedfinancial reporting valuations 10 times or more(Figure D6).

Transactions is the second most commonpurpose for valuations (Figure D5). We foundthat 42.9% of respondents from Indonesiahave been involved in transaction valuations10 times or more over the last three years,compared to respondents from Singapore(23.4%) and Malaysia (29.0%) (Figure D6).

43.9%

30.0%

4.0% 6.8%

18.3%

25.6%

9.1%13.0%

37.8%44.4%

86.9%80.2%

0.0%

10.0%

20.0%

30.0%

40.0%

50.0%

60.0%

70.0%

80.0%

90.0%

100.0%

Financial reporting Transactions Litigation or disputeresolution

Tax compliance

3 times or less

4-9 times

10 times or more

Fina

ncia

lrep

ortin

gTr

ansa

ctio

ns

40.7%

39.3%

51.6%

43.6%

29.6%

32.1%

16.1%

11.7%

29.6%

28.6%

32.3%

44.7%

Others

Indonesia

Malaysia

Singapore

40.7%

42.9%

29.0%

23.4%

25.9%

32.1%

19.4%

25.5%

33.3%

25.0%

51.6%

51.1%

0% 20% 40% 60% 80% 100%

Others

Indonesia

Malaysia

Singapore

10 times or more 4-9 times 3 times or less



Litigation or dispute resolution Tax compliance

Valuations for litigation or dispute resolutionsand tax compliance are less common thanfinancial reporting and transactions. However,49.5% of respondents from Singapore haveperformed valuations for litigation or disputevaluations, while 50.0% of respondents fromIndonesia have performed valuations for taxcompliance (Figure D7).

Survey highlight

► Purpose of valuations across ASEAN is driven byeach country’s economic, legislative, and regulatoryenvironment.

► Respondents from Indonesia have been involved intransaction valuations more frequently thanrespondents from Singapore and Malaysia.

► Valuations for litigation or dispute resolutions andtax compliance are less common than financialreporting and transactions.

► Respondents from Indonesia have the mostexperience with valuations for tax compliance whilethose from Singapore have the most experiencewith valuations for litigation or dispute resolutions.

D7: Geographical location of respondents who have been involved in valuations for litigation or dispute resolution and taxcompliance over the last three years.

Num

ber

ofre

spon

dent

s

Singapore Malaysia Indonesia

Num

ber

ofre

spon

dent

s

Singapore Malaysia Indonesia

Have not been involvedin this type of valuation

Have been involved inthis type of valuation


D8: Over the last three years, how often have you been involved in valuations for each of the asset classes mentionedbelow?

Subject of valuation and its complexity

D9: What is the level of complexity involved in valuing these asset classes?

Familiarity may not equate to less complexityBusiness, equity, and intangible assets were the most common subjects of valuation (Figure D8). At the same time,close to 40% think valuations for the same three asset classes are complex.

Respondents’ lack of familiarity with valuing real estate, plant and equipment and other inventories, and biologicalassets, may be due to their industry experience, which has been primarily focused on financial services and consumerproducts and retail (Figure D9). These asset classes are not commonly found in the aforementioned industries.

34.6% 35.2%

22.5%

6.8% 6.7% 4.0%11.4% 10.7%

28.5% 24.0%

23.6%

11.9% 9.0% 11.4%

15.3% 11.9%

36.9% 40.8%

53.9%

81.4% 84.3% 84.7%73.3% 77.4%

0%

10%

20%

30%

40%

50%

60%

70%

80%

90%

100%

Business Equity Intangibleassets

Real estate Plant andequipment,and other

inventories

Biologicalassets

Financialassets

Financialliabilities

3 times or less

4-9 times

10 times or more

44.1%37.4%

43.6%

9.0% 5.6%16.7% 21.7% 25.6%

41.3%

40.8%22.9%

19.8% 25.3%12.1%

21.1%19.9%

14.5%21.8%

33.5%

71.2% 69.1% 71.3%

57.1% 54.5%

0%

10%

20%

30%

40%

50%

60%

70%

80%

90%

100%


Real estate Plant andequipment,and other

inventories

Biologicalassets

Financialassets

Financialliabilities

Easy

Average

Complex

| Business Valuation Market Study 20178 | Business Valuation Market Study 2017


Valuation process and trends

D10: How often do you use the following approaches inyour business valuations?

Subject of valuation and its complexity

Respondents prefer the Income and MarketapproachesThe income and market approaches continue to be thetools-of-choice for valuations among respondents(Figure D10).

Only 16.5% of respondents often use the costapproach, which could be due to financial statementsnot capturing the full earnings power of a business.Businesses’ balance sheets have become more asset-light with the advent of disruptive technologies, withtrue value residing in intangible assets such as brandsthat are best quantified through other approaches.

D11: What is the typical way you would conclude avaluation?

Support your conclusionFigure D11 shows that over 90% of respondents usemore than one approach to conclude their valuations.

The most common approach among the respondentsis to use a primary approach and another as across-check.

Survey highlight

► Practitioners in professional services commonlyconclude a valuation by cross-checking the resultsof the primary to another approach.

88.0%81.0%

16.5%

7.6%13.9%

60.1%

4.4% 5.1%

23.4%

0%

10%

20%

30%

40%

50%

60%

70%

80%

90%

100%

Incomeapproach

Marketapproach

Cost approach

Hardly

Occasionally

Often

0%

10%

20%

30%

40%

50%

60%

70%

80%

90%

100%

Average of valuationresults from different

approaches

Using a primaryapproach, and

another for cross-check

Just one approach

Practitioners in professional services

Practitioners in corporate and investment

41.2%

71.4%

63.6%

58.8%

36.4%

28.6%


D12: Please select up to three tasks (2014: one task) that you find most challenging when applying the income approach.

Income approach challenges

0%

20%

40%

60%

80%Determining the cost of capital

Determining net financial debt

Computing terminal valueDetermining the length of the forecastperiod

Estimating cash flows projections andtheir underlying assumptions

2014 survey 2017 survey

Estimating cash flowsprojections and their underlying

assumptions

Respondents struggle with long-term forecastsIn the 2014 survey, we asked respondents to selectthe three most challenging tasks when applying theincome approach (Figure D12).

We decided to ask the same question with a slighttwist; select the one task instead of three. Focusingon what truly matters, an overwhelming majority(74.7%) chose estimating cash flow projections andtheir underlying assumptions (Figure D12).

Estimating future cash flows is a difficult processthat requires reliable financial information or at thevery least, realistic projections. The effect ofmiscalculations in cash flows over the life of aproject is much greater than that of a similarpercentage change to discount rates.

Respondents have their work cut out for them;unprecedented events in the marketplace, such asbrick-and-mortar businesses shifting their salesonline, and an era of depressed oil prices haverendered historical data irrelevant for cash flowprojections.

This also suggests that technical challenges relatingto the cost of capital and length of forecast periodare less critical to the valuation process.

Survey highlight

► The top three challenges of applying the incomeapproach come as no surprise, but when asked tochoose, respondents see estimating cash flows as“The Challenge”.

► There appears to be less fuss over the ubiquitousweighted average cost of capital, which isattributable to an increase in the availability ofdata, knowledge, and familiarity with how theWACC is built.



D13: What is your preferred approach to address significantuncertainty in future cash flows?

Cash flows under the income approach

A balanced approach to address uncertaintyMost respondents (45.5%) prepare multiple scenariosof possible future cash flows to address uncertaintiesin cash flow projections, a sentiment echoed bypractitioners in both professional services andcorporate and investment (Figure D13).

Preparing multiple scenarios is seen as a balancebetween the probability-weighted average of cashflows, and cash flows under the most likely scenario.

While more precise, probabilities are unobservable andhighly subjective, making the final valuation quitesensitive to probability weightings. On the other end, asingle scenario does not consider the possibility thatreality may deviate from expectations.

That said, outlined scenarios should be realistic and tryto cover the spectrum of possibilities.

The next best thing…Respondents were divided on viable alternatives foraddressing uncertainty. Figure D14 shows thatpractitioners in professional services’ preference foradjusting the cost of capital, while practitioners incorporate and investment prefer preparing a singlemost likely set of cash flows.

0%

10%

20%

30%

40%

50%

Prepare a single mostlikely set of cash flows

Prepare probability-weighted expected cash

flows

Adjust the cost of capital

Prepare multiplescenarios of possible

future cash flows

Practitioners in corporate and investment

Practitioners in professional services

30.3%

13.1%45.5%

11.0%

Adjust the cost of capital

Prepare a single most likely set of cash flows

Prepare multiple scenarios of possible future cash flows

Prepare probability-weighted expected cash flows

D14: What is your preferred approach to addresssignificant uncertainty in future cash flows (based onrespondents’ profile)?


D15: How often do you use the following methods to calculate the terminal value in a business valuation?

Terminal value calculation

Gordon is very popularOften contributing to more than 50% of the discountedcash flow value, how respondents assess terminal valuedeserves some attention.

Respondents have indicated their preference for theGordon Growth Model to close off valuations; it is usedoften across asset classes, valuation complexity,and purpose.

An extension of the Dividend Growth Model, the GordonGrowth Model is simple to comprehend and allows forcompany growth over time through reinvestment ofretained profits.

It is notable that exit multiples are relatively popular, butmay not be widely used due to its inconsistency with theapplication of the income approach

Additionally, estimating the exit multiple at a future point intime is challenging and unobservable.

The salvage value or disposable cost appears to be theleast common method adopted by survey respondents; abusiness’s operations is assumed to cease at some pointin the future, and all assets will be sold to the highestbidders. However, this approach may be unrealistic asbusinesses are typically assumed to operate as agoing concern.

Most selected

Least selected


Financialreporting

TransactionsAverage

BusinessComplex Average Complex

EquityAverage Complex

Intangible assets

Often

Occasionally

Hardly

Salvagevalue or

disposablecost

Often

Occasionally

Hardly

GordonGrowthModel

Often

Occasionally

Hardly

Exitmultiple



D16: Please select the one task you find most challenging when applying the market approach.

Market approach challenges

D17: How often do you use the market approach in yourbusiness valuations?

Top market approach challenge: Selectingcomparable companies and transactions…Selecting comparable companies or transactions wasidentified as the top challenge of applying the marketapproach (Figure D16).

We tried to find a correlation between the frequency ofusing the market approach and the difficulty ofselecting comparable companies and transactions.The verdict? In spite of their experience with themarket approach (Figure D17), respondents in generalfind the selection of comparable companies andtransactions to be the most challenging.

Frequent users of the market approach (16.2%) findthe selection of an appropriate multiple morechallenging relative to other users, who viewadjustments for non-operating and surplus assets asmore challenging than selecting appropriate multiples(Figure D17).

40.0% 42.1%

64.1%

20.0% 15.8%

16.2%

10.5%

13.7%

20.0%

21.1%

20.0%10.5%

6.0%

0%

10%

20%

30%

40%

50%

60%

70%

80%

90%

100%

Hardly Occasionally Often

Others

Adjusting for non-operating and surplus assets

Determining normalized financial measures

Selecting appropriate financial and/or operating multiples

Selecting comparable companies or transactions

60.3%16.3%

12.8%

8.5%

2.1%

Selecting comparable companies or transactions Selecting appropriate financial and/or operating multiples

Determining normalized financial measures Adjusting for non-operating and surplus assets

Others


D18: Please select the top three measures you usually relyon when performing a business valuation using the marketapproach.

Multiples adopted in business valuations

EBITDA, the winner. Revenue multiple, the darkhorse…Earnings, rather than book value, is the preferredmeasure of business value among our respondents(Figure D18).

EBITDA is the most widely used earnings measure(31.7%). Revenue came in second place (15.6%) withbook value of equity and profit after tax (both 14.4%) hoton its heels.

Revenue, a dark horse, took second place. We believethis can be explained by technology start-ups becomingcommonplace across ASEAN; revenue then becomes abetter base for value than profits.

Practitioners in professional services indicated apreference for book value of equity and revenue asalternative measures after EBITDA, whereaspractitioners in corporate and investment prefer freecash flow and profit after tax (Figure D19).

D19: The selected measures by practitioners in professionalservices and corporate and investment.

0%

10%

20%

30%

40%EBITDA

Revenue

Book Value ofEquity

Profit after Tax

EBIT

Free Cash Flow

Practitioners in corporate and investmentPractitioners in professional services

Survey highlight

► The EBITDA multiple came out tops among themany possible multiples that can be used whenadopting the Market Approach, a surprising moveaway from the formerly popular P/E multiple.

► The revenue multiple snuck into second place, andwe believe this can be explained by technologystart-ups becoming commonplace across ASEAN.

31.7%

15.6%

14.4%

14.4%

13.9%

9.9%

EBITDA Revenue Profit after tax

Book value of equity Free cash flow EBIT

Free cash flow Revenue

EBITDA

Book valueof equityEBIT

Profit after tax



40.5%

19.2%

59.5%

80.8%

0%

10%

20%

30%

40%

50%

60%

70%

80%

90%

100%

Suggested industry-relatedmultiples

Did not suggest industry-related multiples

Certified practioner Non-certified practitioner

D20: Other than the multiples listed, have you used anyother multiples for a business valuation?

The rise of industry multiples

As illustrated in Figure D20, practitioners have shown aninclination for industry multiples (where applicable) overtraditional ones.

Some industry-related multiples listed by respondents:

IndustryMultipleIndustry Multiple

Natural resources • Price-to-reserve• Enterprise value (EV)/reserve,

EV/barrel, EV/1P or EV/2P, EV/ton• MT of mining reserve

Crude palm oil • EV/planted area

Plantation • EV/ha

Tower provider • EV/tower

Media,technology ande-commerce

• EV/view, EV/subscriber, EV/visit,EV/like

• Gross merchandise value (GMV)multiples

Private equity • Price-to-asset under management(AUM)

Energy • Dollar per megawatt

Survey highlight

► The respondents have displayed a keenawareness at sector and industry specific marketmultiples. These are preferred over traditionalmultiples that focus on earnings and book valueswhen valuing businesses in specific industries.


Looking forward: A peek into thefuture

D21: The choice of essential skill based on respondentswho are experienced in financial reporting and transactionvaluations.

Essential skills for a dynamic business world

D22: The experienced practitioners’1 choice of essential skillbased geographical locations.

Business acumen, an essential for transactionvaluations while financial analysis is key forfinancial reporting valuations

Financial analysis (20.3%), strategic thinking (20.1%)and business acumen (18.9%) are seen as the mostessential skills among respondents. Endorsement of allother skills fall below 18% (Figure D21).

Across ASEAN, respondents’ views on essential skillswere rather homogeneous with the exception ofIndonesia. Indonesian respondents chose strategicthinking and data analytics as the most essential skill(Figure 22).

Note:1 Respondents who are involved in financial reporting or

transaction valuations for at least 10 times2 ASEAN countries, including Thailand, the Philippines, Vietnam and

Brunei

Data analytics: Attractive yet unloved

Professional firms, including consulting firms and bigfour accounting firms, have been utilizing data analyticsto help organizations better understand their customersand areas of potential growth. Yet, results of the surveyas illustrated in Figure D21 show that data analytics wasranked near bottom of the list of essential skills. This isdisquieting in the face of disruption to many traditionalprofessions and businesses in today's information age.

20.3%

20.1%

18.9%

17.6%

12.3%

8.3%

2.5%

Financial analysis Strategic thinking

Business acumen Financial modelling

Data analytics Report writing

Computer programming

0%

5%

10%

15%

20%

25%

0%

5%

10%

15%

20%

25%

0%

5%

10%

15%

20%

25%

0%

5%

10%

15%

20%

25%

Computerprogramming

Financialanalysis

Financialmodelling

Businessacumen

Strategicthinking

Reportwriting

Dataanalytics

ASEAN2

Malaysia

Singapore

Indonesia



20.7% 19.3% 20.7%

21.3% 21.4% 19.8%

19.8%17.3% 21.6%

17.4%16.5%

18.0%

11.1%14.4%

9.5%

7.8% 8.2% 7.7%

1.9% 2.9% 2.7%

0%

10%

20%

30%

40%

50%

60%

70%

80%

90%

100%

Assessing futureopportunities and

potential for growth

Collection andanalysis of all

relevant information

Assessing the riskprofile of the

business

Financial analysis Strategic thinkingBusiness acumen Financial modellingData analytics Report writingComputer programming

D23: Out of all the steps in the business valuation process,which three are the most challenging?

Steps in business valuation► Collection and analysis of all relevant information► Assessing the risk profile of the business► Assessing future opportunities and potential for

growth► Normalizations of financial statements► Selecting appropriate valuation approaches and

methods► Transaction considerations, including the

number of buyers and sellers in the industry► Valuation conclusion

Interestingly, respondents who selected collection, riskprofile, and opportunities as the three most challengingsteps in the business valuation process, rankedbusiness acumen, financial analysis and strategicthinking ahead of data analytics (Figure D24).

Data analytics requires large volumes of data and takestime to perform. However, we believe that the threechallenges can be resolved with data analytics, whichuses predictive and prescriptive modelling to helporganizations anticipate business opportunities andimprove decision making.

D24: What do you believe will be the top three skillsprofessionals must possess to remain relevant?

Survey highlight

► Collection and analysis of all relevantinformation is one of the top three challengesin valuation process.

► Interestingly, data analytics is still gainingtraction as an essential skill across ASEAN,with the exception of Indonesia.

► Data analytics may resolve respondents’ topthree business valuation challenges. Adeeper understanding of the power of dataanalytics to resolve valuation challenges mustbe harnessed.

Opportunities27.2%

Collection19.9%

Risk profile18.1%

Conclusion12.0%

Transactionconsiderations

11.8%

Selectapproach 5.6%

Normalizations5.4%


D25: Which of the following issues do you think willhave to be increasingly factored into the process ofconducting a business valuation exercise?

Issues affecting businesses and their impact on valuations

D26: What is the size of your company in terms ofannual revenue?

What’s keeping our respondents awake?Social media, mobile, wearables, and autonomousvehicles: just some technologies with huge implicationson business value as they change customer andemployee behavior, values and expectations.

More than ever, valuations will need to considerscenarios where traditional assumptions of businessgrowth e.g., build it and they will come, may need to beabandoned as technology and society are evolvingfaster than businesses can naturally adapt.

Respondents, particularly those from largeorganizations (Figure D26) have recognized thisdevelopment by selecting disruptive technology as themain issue to be considered in a business valuation.

Data analytics is the second issue highlighted byrespondents. Today, people and machines are creatinglarge and disparate data mountains.

Harnessed in the right manner, data analytics could aidwith the discovery and communication of meaningfulpatterns in the data to derive insights into customerneeds and areas for performance improvement.

Next on the list is environmental, social and governance(ESG) factors, slowly becoming an important yardstick ofsustainability as some stock exchanges have made itcompulsory for listed companies to disclose their ESGpractices. Done well, it identifies risks related toenvironmental, social and governance aspects of acompany’s performance and shows how companiesmanage such issues relative to their peers.

47.1%

16.9%

16.2%

8.8%

6.6%4.4%

Disruptive technology

Data analytics

Environmental, social and governance

Regulatory oversight

Global geopolitical development

Cyber security threats

41.7% 42.9%

59.5%

13.9%20.6%

13.5%19.4%15.9%

13.5%11.1%11.1%

2.7%8.3% 4.8% 8.1%5.6% 4.8% 2.7%

0%

10%

20%

30%

40%

50%

60%

70%

80%

90%

100%

< US$10m US$10m-1b > US$1b

Cyber security threats

Global geopolitical development

Regulatory oversight

Environmental, social and governance

Data analytics

Disruptive technology



D27: What do you believe will be the top three skillsprofessionals must possess to remain relevant?

Skills and knowledge disciplines required for valuing companies of the future

D28: Please select the top three knowledge disciplinesyou see as essential for business valuations.

Q: Which of the following issues do you think will have to be increasingly factored into the process ofconducting a business valuation exercise?

Technical skills alone, is insufficientSurvey respondents who view data analytics anddisruptive technology as key valuation issuesselected business acumen and strategic thinking asnecessary competencies to remain relevant invaluations (Figure D27).

While financial analysis also ranked highly, thesurvey results indicate that technical skills aloneare neither sufficient nor most important inperforming valuations.

Respondents who further explained why dataanalytics and disruptive technology are key valuationissues raised points such as the importance ofanalyzing both financial and non-financial data invaluing a company, the ability to forecast reliablecash flow scenarios through strong businessacumen, and the need to understand new businessmodels in a changing business environment.

Finance and accounting are key disciplinesRespondents who chose data analytics and disruptivetechnologies as key valuation issues also view financeand accounting as the top two disciplines essential forvaluations (Figure D28).

The interpretation of financial statements,understanding financing sources, calculatingprofitability and risk, and performing financial analysisto estimate future earnings, are enabled through thesedisciplines.

Despite mathematics and statistics being highly utilizedin data analytics, they did not rank highly amongsurvey respondents. This perhaps indicates thatprofessionals do not yet fully grasp the data analyticsprocess despite acknowledging its importance.

22.9% 20.3%

19.3% 24.6%

19.3%20.3%

16.7% 11.6%

11.5% 13.0%

7.8% 7.2%

2.5% 3.0%

0%

10%

20%

30%

40%

50%

60%

70%

80%

90%

100%

Disruptivetechnology

Data analytics

Computerprogramming

Report writing

Data analytics

Financial modelling

Financial analysis

Business acumen

Strategic thinking

27.9%23.5%

30.5%

29.4%

16.3%

16.2%

7.4%14.7%

8.4% 7.4%

4.7%7.4%

4.7%1.4%

0%

10%

20%

30%

40%

50%

60%

70%

80%

90%

100%

Disruptivetechnology

Data analytics

Law

Mathematics

Statistics

Tax

Economics

Finance

Accounting


D29: In terms of growth in the business valuation space, where do you think the key drivers will come from over the nextthree years?

Transaction and financial reporting are the key drivers for valuations

Consistent with results from the 2014 survey,respondents identified mergers, acquisitions, anddisposals or takeovers, in addition to financialreporting, as the top two drivers for valuations over thenext three years (Figure D30).

42% and 36% of respondents foresee growth invaluations for IPOs and fundraising, and investmentanalysis for share investments, respectively (FigureD29). Expected growth in these areas is in line with thestart-up funding growth in ASEAN, which hit a recordhigh of US$2.6b in 2016, up over 60% from theprevious year (source: Tech in Asia).

D30: In terms of growth in the business valuationspace, where do you think the key drivers will comefrom over the next three years?

0%20%40%60%80%

100%

Mergers,Acquisitions, and

Disposals /Takeovers

FinancialReporting

InvestmentAnalysis for Share

Investments

Litigation / DisputeResolutions

Compliance toStock ExchangeRequirements

Tax Related

2017 2014

88.2%

61.8%

41.9%

36.0%

30.1%

21.3%

17.6%

0% 10% 20% 30% 40% 50% 60% 70% 80% 90% 100%

Mergers, acquisitions, and disposals ortakeovers

Financial reporting

IPOs or fundraising

Investment analysis for share investments

Litigation or dispute resolutions

Compliance to stock exchangerequirements

Tax related

Mergers,acquisitions, anddisposals ortakeovers

Financialreporting

Compliance tostock exchange

requirements

Tax-related

Investmentanalysis for shareinvestments

Litigation or disputeresolutions



D31: In which industries will these efforts to be focused?

Industries with strong valuation growth

Technology will make the world go round…

21% of survey respondents believe that thetechnology industry will become the focal point ofvaluation growth, although only 2% ofrespondents primarily work in the technologyindustry (Figures D31 and D4).

Financial services and consumer products andretail are also expected to be industries of focus inASEAN, as indicated by 27% of surveyrespondents (Figure D31).

In addition, 11% and 9% of respondents foresee agrowth in demand for valuations in the health andlife sciences and real estate hospitality andconstructions sectors, respectively.

Survey highlight

► Mergers, acquisitions, and disposals ortakeovers, in addition to financial reporting, arethe top two drivers for valuations over the nextthree years.

► Are we ready for the coming creation anddisruption of industries caused by newtechnologies?

20.5%

13.7%

13.2%

11.2%

9.3%

32.1%Technology

Financial Services

Consumer Products & Retail

Health & Life Sciences

Real Estate, Hospitality & Construction

Others


D32: From the list below, select the relevant conditions you believe must exist for the quality and consistency of valuationpractices to improve across ASEAN.

Standardization of valuation practices across ASEAN

D33: Which of the following best describes you?

The need for universally recognized standardsof practice and ethics, as well as a continuingeducation curriculum

The majority of respondents believe thatuniversally recognized standards of practice andethics is required to uphold the quality of thevaluation profession, followed by a continuingeducation curriculum and a code of conduct(Figure D32).

Among respondents who work as practitioners inprofessional services, only 19% view a single setof qualifications as important for the quality andconsistency of valuation practices (Figure D33).

39.4%

24.5%

20.8%

15.2%

Universally recognized standards ofpractice and ethics

A continuing education curriculum

A code of conduct

A single set of qualifications with respectto education level and work experience

38.5%46.2% 41.7% 38.7%

30.8%26.9% 33.3%

21.4%

19.2%19.2% 16.7%

21.4%

11.5% 7.7% 8.3%18.5%

0%

10%

20%

30%

40%

50%

60%

70%

80%

90%

100%

Investmentmanager or

analyst

Buy-sidecorporatefinance

professional

Sell-sidecorporatefinance

professional

Valuationpractitioner inprofessional

services

A single set of qualifications with respect to education level and workexperience

A code of conduct

A continuing education curriculum

Universally recognized standards of practice and ethics



Andre TohPartner, Transaction Advisory ServicesErnst & Young Solutions [email protected]+65 6309 6214

Nick LeongAssociate Director, Industry DevelopmentSingapore Accountancy [email protected]+65 6325 0537

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About Singapore Accountancy Commission (SAC)

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