An interview with Fisal Alsayrafi by Business Valuation Update (BVU):
BVU: How did you get into business
valuation?
Faisal Alsayrafi: I
joined Arthur Andersen after
graduating with a masters in accounting and MBA
in finance from a U.S. graduate
school. I worked closely with senior management providing con- sulting and
became managing partner of corpo- rate finance, M&A, and advisory services for the Middle East region where valuations services
were a critical concern.
BVU: Is business valuation regulated in your country?
FA: Yes, valuation
services are now regulated by TAQEEM for most of areas and disciplines of valu- ation. TAQEEM is the Saudi Authority for Accred- ited Valuers, a
government regulator for business
valuations in Saudi Arabia.
BVU: What
is the nature of the typical valuation engagements in your market area?
FA: The environment is competitive and evolv- ing. The engagements range from
valuations for financial reporting, goodwill impairment to buy-/sell-side engagements (for business and machin- ery and equipment).
BVU: What countries are in your
market area?
FA: Saudi Arabia,
UAE, Qatar, Bahrain, Kuwait, Oman (GCC countries), and Egypt.
BVU: Are there
any areas of valuation practice that are particularly growing?
FA: There is a growing interest in intellectual
prop- erty and the valuation of IP assets,
as well as valu-
ation of machinery and equipment in connection with purchase price allocations.
BVU: What
sources of financial data do you use for business valuations?
FA: One important source is the Tadawul,
the Saudi
stock exchange. As regulations have relaxed
to allow more foreign investment, it has become more important as a
barometer of value. Accred- ited valuers also use U.S.-based databases as a
benchmark for valuation purposes (i.e., Business
Valuation Resources for private company data).
BVU: Are
private equity or venture capital groups active in your market?
FA: Private equity (PE) and venture capital
(VC) are active, but they
tend to acquire minority interests in vertically
integrated companies and serve as family advisors. They are also very important n
those instances where firms are in
distress and in need of capital
because the laws involving bank- ruptcy and turnarounds are new and evolving and PE and VCs offer more certainty.
BVU: Are valuers involved in
litigation? Is there a court system similar to ours in the U.S.?
FA: Yes, there is a role for litigation support in facilitating dispute resolution. The court system in Saudi Arabia (independent) does not have judges
that specialize,
such as the Delaware Court
of Chancery or courts in the U.S. where
IP disputes are presented to judges
with the training
and edu- cation to handle
those matters. As the number of businesses
grow in response to diversifica- tion
efforts, the need for specialized courts will
increase and we may see those become
a reality.
BVU: Is
there anything unique to business valua- tion in your market area (e.g., scope
of services, methodology, or reports)?
FA: Most professional firms and qualified practi- tioners use U.S.-based approaches and standards such as USPAP/AICPA standards. In Saudi Arabia and most of the GCC, the
International Valuation Standard (IVS) provides the governing standards as per
Saudi TAQEEM regulations in connec-
tion with iiBV (International Institute of Business Valuers) advisory contractors.
BVU: How do you develop a cost of
capital?
FA: Normally, professionals will develop a cost of capital in accordance with
international cost of capital and CAPM
methodologies.
BVU: What set of standards do valuers
use?
FA: Currently, in Saudi Arabia, we all use the
IVS.
BVU: Are
business valuers certified? What cre- dentials do they have?
FA: Currently,
TAQEEM has developed licens- ing and accreditation requirements for appraisal
practices using the help of the iiBV for
business valuation discipline, which eventually will be the ASA basic course material (regulations are in draft form at this stage).
BVU: In
addition to the iiBV, are business
valuers active in other valuation or finance organizations, such as the CFA, ASA, or RICS?
FA: I believe the answer is “yes,” and
TAQEEM is reaching out to various
professional institutes in the world. The
most committed and networked entities are the iiBV, AI, RICS, and Malaysian
Institute of Appraisals. There
are other profession- al
organizations that have expressed an interest in participating in training but
have not executed as of yet. As for professionals providing valuation services
across the various disciplines, there are those
holding designations earned through the ASA, CFA, RICS, and NACVA. I’m the only person qualified in ASA, as Accredited
Senior Appraiser, in the whole region! Then, there are a few others that have earned the CFA designation, others that have
earned the CVA from NACVA and the RICS
accreditation,
which focuses on real estate.
Editor’s note: Faisal Alsayrafi, ASA, CVA, CMEA, CPA, is founder, president, and CEO of Financial Transaction House (FTH) in Saudi Arabia, which offers a wide range of corporate finance advisory services to a diversified client base in the Middle East. He can be reached at faisal.alsayrafi@fthgulf.com or at +966 12 657 3030.
