Speech by Ms Indranee Rajah, Minister in the Prime Minister's Office, Second Minister for Finance and Education, at The IVAS-IVSC Business Valuation Conference 2019 on Thursday, 10 October 2019, at Sands Expo and Convention Centre10 Oct 2019
Opportunities for Business Valuation in Tomorrow’s World
Singapore Accountancy Commission (SAC) Board Members
Lord Alistair Darling, Chairman of the Board of Trustees of the International Valuation Standards Council (IVSC)
Mr Harsha Basnayake, Chairman of the Institute of Valuers and Appraisers, Singapore (IVAS)
Ladies and gentlemen
1. Let me begin by welcoming all of you here and also congratulating Lord Alistair Darling on his election to the Board of Trustees of the IVSC.
2. The theme for this year’s conference, “Creating Value in Dynamic Times”, is very apt obviously, given the interesting times that we live in.
Dynamic Times in the Global Economy
3. In the past decade, the range and pace of business model innovation had been significant. For example, when Alibaba embarked on its journey to “foster the development of an open, coordinated, [and] prosperous e-commerce ecosystem” in 2007, its business model was different from other counterparts.In 2007, few businesses had gone down the path of leveraging on a tech-enabled platform to coordinate B2B, B2C, and C2C sales activities.
4. Today, such a business model is increasingly common. Consider that of the ten valuable companies on BrandZ’s Top 100 Most Valuable Global Brand ranking 2019, seven are internet companies that also adopt similar business models. They include notable ones, such as Facebook, Google, and Tencent. Companies like Airbnb and Uber are also leveraging on tech-enabled platforms for growth.
5. The changing business environment reflects the dynamic times that we live in, where global forces are rapidly reshaping the way we see, think, and act.
6. In times of change, there will be new challenges. At the same time, as we all know, there will be new opportunities. What we must do is to be astute in identifying them, and to be nimble in seizing them.
7. For valuers doing business out of Singapore and ASEAN, new opportunities can be widespread. Emerging Asia is expected to grow by more than 6% from 2019 to 2020, even though the International Monetary Fund (IMF) expects overall global growth in 2019 to slow down to 3.2%.
8. Singapore and ASEAN are also well positioned to tap on Asia’s growth, as new technologies open up new markets. Take data centres for example. Globally, the demand for data centres is increasing, driven by emerging technologies like the Internet of Things (IoT), cloud infrastructure, and big data analytics. Singapore and ASEAN are at the centre of this trend. According to a Cushman & Wakefield report, Southeast Asia is expected to be the leading region for co-location of data centres from 2019 to 2024. Singapore, in particular, is ranked as the third most robust data centre market in the world.
Opportunities for Business Valuation
9. Let me highlight three opportunities that are pertinent for business valuers. These are:
a. Financing for infrastructure;
b. Intellectual property valuation; and
c. M&A valuation.
10. First, financing for infrastructure.
a. Various reports have highlighted the need for significant infrastructure (“infra”) financing. For example, the Asian Development Bank (ADB) estimates that Asia needs about US$26 trillion in infra investments until 2030. This means about US$1.7 trillion annually, or more than two times the amount of annual expenditure on infra investments today. Within ASEAN, the quantum of infra investments needed is smaller. Even then, the amount of investments needed is still expected to be about US$210 billion annually.
b. As infra investment increases, the demand for business valuers will grow, given your technical expertise.
11. Second, intellectual property valuation.
a. In the new economic landscape, value increasingly stems from new economy assets like technology, brand, data, and software. Take Razer Inc. for example. Its market capitalisation is valued at about US$1 billion. Majority of this value comes from Razer’s intangible assets.
b. Against this backdrop, there will be new opportunities for business valuers to capture value. Businesses will need trusted advisors, like business valuers, to value intangible assets and intellectual property.
12. Third, M&A valuation.
a. Asia remains a hotbed for M&A, as companies continue to look to grow via acquisitions. According to the EY Capital Confidence Barometer, about one in two Asia Pacific companies have plans to acquire new businesses over the next twelve months. In tandem with rising sentiments, M&A activities have been on the rise. According to Mergermarket analysis, M&A deals in Singapore amounted to about US$17 billion in the first half of 2019. This is about two times the value of deals, over a similar period in 2018.
b. Again, businesses will need trusted advisors to help them evaluate the intrinsic value of their purchases and assess whether the consideration for their purchases is fair. This is again where business valuers can step in to add value.
Need for Business Valuers to Adapt
13. Given the opportunities in infra financing, IP valuation and M&A, how can business valuers be prepared and ready to tap on the opportunities? I think there are three things that business valuers must aspire to do.
a. First, to provide services based on clear and comparable standards;
b. Second, to maintain high standards of ethics and technical competency; and
c. Third, to collaborate with others.
14. The first two aspects form the foundation upon which trust in business valuation can be built. The third aspect on collaboration is in the spirit of Singapore’s SG Together movement.
15. Notably, we are increasingly seeing opportunities across sectors. Through cross-sector collaborations, business valuers will be better positioned to identify and act on the new opportunities that may arise, as opportunities may not fall squarely into traditional business valuation space.
16. In this regard, I am heartened to see the ongoing efforts to prepare business valuers.
a. In the international space, IVSC has made much progress in increasing adoption of International Valuation Standards, or IVS in short. IVS is recognised or adopted in more than one hundred jurisdictions today. Increasing the recognition or adoption of IVS will enhance the comparability of business valuers’ work.
b. In Singapore, there have also been several SAC and IVAS initiatives to uplift the competencies of business valuers. For example, the Chartered Valuer and Appraiser (CVA) programme. I launched the programme three years ago. Since its inception, more than two hundred people have enrolled in the programme. SAC and IVAS have also been working to keep the CVA curriculum up-to-date. Professionals who aspire to be business valuers, and business valuers who wish to upskill and reskill can embark on the programme.
17. So let me conclude. We live in interesting and dynamic times. And in such times, new opportunities abound. What we need to do is to be ready to seize these opportunities. So I want to urge everyone to be prepared to tap on the opportunities as they arise.
18. Thank you very much.