- The Fourth Industrial Revolution will see emerging technologies transform economies
- Intangible assets, such as IP and technology, are gaining importance
- Business valuation specialists need to adapt their approach to address this change
We are in the midst of the Fourth Industrial Revolution, the executive chairman of the World Economic Forum, Klaus Schwab, claimed in a 2015 article. Schwab expects this era to be marked by breakthroughs in emerging technologies in fields such as robotics, artificial intelligence, nanotechnology, quantum computing, biotechnology, the internet of things, the industrial internet of things (IIoT), decentralised consensus, fifth-generation wireless technologies (5G), 3D printing and fully autonomous vehicles.
This revolution is expected to impact all disciplines and economies – and is already disrupting almost every industry, creating change at an unprecedented rate. What’s more, the Fourth Industrial Revolution promises much in the way of efficiencies and productivity gains. It will almost certainly lead to enormous growth in the value of intangible assets.
As business valuation specialists, this will affect how we approach our work significantly.
Innovation requires companies to invest in research and development in-house or to acquire the innovations of others. Investors are always keen to realise returns from innovation but current accounting treatments mean that many of these intangible assets are not recognised on-balance sheet as assets but rather as expenses.
“Understanding how to properly value non-physical assets is fast becoming a central component of our expertise and skill.”
Many stockmarket darlings have business models based around their software and technology assets. These companies have few physical assets to leverage, yet their valuations often trump the industrial giants. So understanding how to properly value non-physical assets is fast becoming a central component of our expertise and skill.
Over recent months, Tim Heberden CA (Deloitte Merger and Acquisition Valuation Partner) has travelled around Australia presenting the topic ‘Valuing technology and IP-centric enterprises’ to CA business valuation specialists as part of their annual CPD offering. Tim provides a useful framework for addressing eight common blind spots for analysing IP assets in valuations. CA business specialists can access a recording of the presentation through the specialisation email.
I’d like to thank Tim on the behalf of the CA ANZ Business Valuation Committee for his insightful presentations and for being so generous with his time.
On a final note, please remember that CA ANZ’s new Professional Standards Scheme is due to start 8 October 2019. The new Scheme gives all CA ANZ Australian public practice members access to this valuable professional protection – removing the exclusions on AFSL members and representatives. This will no doubt be welcome news for many of our public practice members who work in the valuation space. Further information is provided in the article New Professional Standards Scheme below.