Companies may have incomplete information for valuation for various reasons, making the task more difficult for valuers but not impossible, said experts from corporate advisory and law firms who discussed how to handle such situations at a recent webinar organised by the Singapore Academy of Law and Institute of Valuers and Appraisers, Singapore (IVAS), themed “Business Valuation of Companies with Incomplete Information”.
Mr Chay Yiowmin, CVA, Founder and Chief Executive Officer of the Chay Corporate Advisory firm, and a Member of IVAS’ Standards and Technical Working Group, outlined reasons that companies may have incomplete information:
Prioritising Valuation Approaches
To determine the best valuation approach in such situations, valuers need to consider what information is available, said Mr Chay. He added that valuers should prioritise:
The Rules For Reporting
Ms Gwendolyn Gn, a Partner in law firm Shook Lin & Bok who specialises in corporate finance, added that specific information is needed for valuations in merger and acquisition deals. For acquisition or disposal of shares, the value of listed and unlisted shares should be represented by their market value and net asset value respectively.
For acquisition or disposal of assets other than shares, their value should be assessed with reference to their book value, or their market value if a valuation has already been conducted for the purpose of the acquisition or disposal.
“Many transactions in Singapore have real property assets as the underlying asset. In these cases, valuations should be carried out according to standards set by the Singapore Institute of Surveyors and Valuers if the properties are located in Singapore, or by international bodies or the relevant authority in the country if the properties are overseas,” Ms Gn said.
She also summarised conditions for different types of transactions:
“Some companies may decide to release such announcements to boost their profile. If they do so, the announcements must include various details, such as the aggregate value of the consideration, the factors taken into account in arriving at it, and if there is financial assistance, the value of the assistance and the interest payable on it,” she said. For assets being acquired or disposed of, the firm must also disclose their book value, net tangible asset value and latest available open market value.
For announcements of these transactions, firms must state the particulars of the transaction, including the names of companies involved, the aggregate and individual value of the assets being bought or sold, details of material conditions attached to the transaction, such as put, call and other options, and other information.
They must also disclose the rationale for the transaction, if any director or controlling shareholder has direct or indirect interest in the transaction, and the details of service contracts of directors proposed to be appointed to the issuer in connection with the transaction.
Ms Gn added that for valuation reports commissioned for such transactions, directors should disclose existing or potential conflicts of interest in appointing a valuer. Those with such conflicts should recuse themselves from meetings and decisions related to the appointment.
Property valuation reports must include the name, professional qualifications and relevant license registration number of the valuer in charge, and the standards used for the valuation. “While the Singapore Exchange Listing Manual does not have specific requirements for other types of valuation reports, these details should also be included,” she said.
She added that commissioning a valuation report does not absolve companies’ boards of all responsibility. She stressed: “Boards have a fiduciary duty and responsibility to ensure that a qualified valuer is appointed, due diligence has been conducted in the appointment, it is in the best interest of the firm to appoint the proposed valuer, and any profit guarantee or forecast is carefully considered.”