Millions of transactions take place each day that set the price of various assets. However, certain assets are unique and/or illiquid, and their values unknown. As such, they require the services of a valuation advisor equipped with appropriate skills and relevant knowledge to opine on the value of various assets.
Valuation professionals provide unbiased and independent assessments of value of all kinds assets, assisting individuals, businesses, and governments to make informed decisions. Valuation professionals’ expertise can facilitate decision-making in the economy and reduce inefficiencies associated with lack of information in the economy.
By providing trusted opinions of value, valuation professionals can mitigate transaction, business, and systematic risk. They can detect and prevent fraud when there is ambiguity about the value of an asset and they can be instrumental in settling any disputes since they can act as informed experts.
Valuation professionals are instrumental to preserving the integrity of the capital markets. They are instrumental in enabling business leaders and investors to make informed decisions and mitigate any potential risks.
Given that the record for the greatest number of net merger and acquisition announcements in a single year was set just last year, it’s reasonable to expect that the number of transactions requiring some sort of valuation services will continue to grow in the coming years. The next generation of valuation professionals will face a complex and continuously changing world, and young professionals must be prepared for and educated with valuation skills and techniques so they can apply these techniques to various situations that may arise from the complex and evolving world around us.
According to Dr. Aswath Damodaran, professor of finance at the Stern School of Business at New York University, valuation is central to almost every aspect of business and in every stage of its life cycle. “If you are the founder of a start-up, being able to value your business will allow you to negotiate for better terms when you raise capital, and if you are a venture capitalist, it will act as a check on over exuberance,” he says. “If you are a manager of a business, understanding what drives value gives provides perspective on whether and where to invest, how much to borrow and how much cash to take out of the firm in dividends and buybacks; and if you are an investor in a publicly-traded company, your capacity to value that company will enable you to keep your balance, even in the midst of confusion and crisis.”
As we grow into an increasingly globalized economy, where change is the only constant, Damodaran believes good valuation skills will become more and more integral.
My firm, Duff & Phelps, began taking steps to appropriately prepare the next generation of valuation professionals seven years ago, with the introduction of its YOUniversity Deal Challenge. The YOUniversity Deal Challenge engages teams of college juniors from around the world to solve real-life problems in valuation and corporate finance, and in doing so, hone a range of skills, including mergers and acquisitions advisory, transaction opinions, transfer pricing, dispute consulting and valuation advisory.
By working with team members to solve problems presented in a complex fact pattern, participants apply technical reasoning and critical thinking throughout key stages of the deal-making process. Win, lose or draw, in the end participants walk away with a stronger perspective on how a deal comes together.
For more information about the Challenge, read on to hear from our most recent winning team, Jonathan Cremeans, Andrew Jasen, Matt Stewart and their faculty advisor Chris Buhler, all from The Ohio State University.
The Student Perspective:
The Duff and Phelps YOUniversity Deal Challenge was a stimulating and rewarding experience for the three of us. We formed our team by talking to and selecting two like-minded classmates who were part of the investment banking prep program at Ohio State and who had previous case competition experience. As a team, we were tasked to analyze a complex and detailed case that was created specifically for this competition and that touched on the many disciplines/practice areas that comprise Duff & Phelps.
With a registration deadline of late October and the solution due in mid-November, we had roughly 3 ½ weeks to submit our first deliverable. We spent a majority of our time focusing on industry research and figuring out how we would tell our story and present our analysis in a compelling way. Once we finished that and felt we actually understood what the case was asking of us, we divided the workload so we could work between classes, and meet consistently to go over our solution as the deadline approached.
Chris Buhler, our faculty advisor, was a valuable resource throughout the experience, sitting down with us multiple times to bring up questions we had not considered and to draw our attention to various errors we had made in our analysis. The week before the submission was due, we met nearly every night, to make sure our analysis and formatting were correct.
It took about two months after we submitted our work to find out we were selected as one of the three semi-finalist teams invited to New York to present to a panel of judges that consisted of internationally-recognized valuation experts from both academia and Duff & Phelps. We were honored, of course, to be chosen as semi-finalists—and somewhat amazed to learn that we had been selected from more than 30 other teams. Upon receiving the good news, we took a moment to celebrate and then quickly got back to work!
One of the aspects of the case that took us a while to adjust to was that while the first submission required our written thoughts and analysis, the second round required that we present our ideas and findings. We practiced our presentation as much as possible to work out transitions and make sure we all hit the main points of our arguments. We, along with our advisor Chris, flew to New York the night before and stayed in a very nice hotel in Midtown.
The morning of the presentation, all three teams (the other two finalist teams were from BYU and Virginia Commonwealth University) arrived at Duff & Phelps New York office for breakfast and a quick debrief from Jake Silverman, the president of Duff & Phelps, which truly demonstrates how significant this competition is to the firm’s recruiting efforts. Each team presented and answered questions from the judges for about an hour. Duff & Phelps hosted a reception and dinner at a local restaurant later that day where we networked and found out the best news of the day—that we had won the 2016 Deal Challenge. As such, each member of our team received a $5,000 scholarship, while each member of the two other finalist teams received a $2,000 scholarships.
All-in-all, the experience was both demanding and fun. It exposed us to the type of work performed by a firm like Duff & Phelps and will be most helpful as we each contemplate our individual career paths (not to mention the fact that one member of our team was also selected by the firm’s corporate finance team as a Summer Intern).
Mark Mondello is a Managing Director and Arya Rahimian is a Senior Associate with Duff & Phelps.