FRP Forensic Services

2023: a year in review. Specialist business valuation and matrimonial tax services.

2023: a year in review FRP Forensic Services

Specialist business valuation and matrimonial tax services

frpadvisory.com

2023 was another busy year for the FRP specialist valuation and matrimonial team. We have undertaken over 90 new instructions on matrimonial and valuation matters, bringing the number of instructions taken by our experts over the last decade to over 900 cases. Our experts and team are based in our Norwich and Cambridge offices. However, we continue to receive instructions from across the UK and a few from overseas. There is no typical case, and we value businesses ranging in size from small family companies to large complex groups of companies including those with international trade and turnover in excess of £500 million. Our experts Fiona Hotston Moore and Jon Dodge, accept instructions as single joint expert, party expert and shadow adviser. We can also provide valuation reports outside of formal proceedings to assist in negotiated settlements and mediation. Our experts are also instructed in business valuations in respect of commercial disputes, shareholder disputes and loss claims. In 2023 the government introduced significant changes to the tax regime applying to divorcing couples. The introduction of the new CGT rules on divorce was intended to remove CGT as being an obstacle for divorcing couples. We presented two webinars on the new CGT rules during 2023 which were attended by over 600 lawyers. We plan to run another webinar on the topic in spring 2024. 2023: a year in review 2023: The Chinese year of the rabbit...longevity, peace & prosperity... An overhaul of tax on divorce & another interesting year for business valuation experts

Real expertise. Real results. 2023: a year in review

As we look forward to 2024 we are expecting the volatile economy to continue. In addition to a general election in 2024 we have the ongoing challenges arising from conflict, inflationary price increases, falling consumer demand and interest rates remaining relatively high. The volatility of the economy means that business fortunes can change quickly and we expect to be asked to prepare updating reports to reflect recent trading results. We appreciate your continued support in 2023 and look forward to continuing to work with you in 2024. In the Chinese horoscope, 2024 is the Year of the Dragon which is said to be one of the luckiest years, promising change, opportunities and wealth.

Whatever the nature of the case, we ensure our opinions clearly reflect our experience and are relevant, understandable, credible, informed and cost effective.

Getting in touch

Fiona Hotston Moore Partner Forensic Services Cambridge & Norwich +44 (0)7770 642 491 fiona.hotstonmoore@frpadvisory.com

Contents

3 Introduction 4 Meet the experts

8 Highlights 9 Introducing Lucy Day 10 Share indices, transaction activity and economic outlook 12 Tips from our webinar 14 2023 client events 6 Meet the senior specialist valuation & tax team 7 Meet the wider specialist team

Jon Dodge Partner Forensic Services Norwich +44 (0)7775 696 809 jon.dodge@frpadvisory.com

frpadvisory.com

2023: a year in review

Meet the experts:

Fiona Hotston Moore

Jon Dodge

Jon joined FRP in 2020 as a Partner in our Forensic Services and Corporate Finance teams, following the acquisition by FRP of the JDC Group (comprising JDC Corporate Finance and Walton Dodge Forensic) which Jon founded in 2004. He is based in our Norwich office. He qualified as a Chartered Accountant in 1991 and since then has specialised in forensic services and corporate finance and related specialist taxation services. Jon specialises in share and business valuation cases - with particular experience and expertise in the Family Courts. He first gave expert valuation evidence in the High Court in 1995 and has given expert evidence in a very wide range of valuation cases over the following 28 years. Having been appointed as an expert on over 850 occasions, Jon is now often instructed in more complex and/or higher value cases. In 2023, Jon was instructed in 32 new valuation matters, most of which were in the Family Court. In addition to his expert witness work, Jon has been the lead M&A adviser in well over 100 successfully completed transactions, including eight successfully completed deals in 2023. His ongoing M&A work includes company sales, acquisitions, capital restructuring, MBO and private equity deals and perfectly complements his work as an expert valuer. Jon was ranked in Chambers and Partners’ Litigation Support Guide in 2023 and was noted as being “extremely thorough and efficient”...”always pragmatic, proportionate and has fantastic judgement”. He was also ranked by Business Weekly in 2023 as one of the top 10 Forensic Accountants in the UK.

Fiona joined FRP in 2020 as a Partner in our Forensic Services team, following the acquisition by FRP of the JDC Group (comprising Walton Dodge Forensic and JDC Corporate Finance). She is based in our Cambridge and Norwich offices. She qualified as a Chartered Accountant in 1990 and as a Chartered Tax Adviser in 1991. She is a Fellow of the Institute of Chartered Accountants and has specialised in expert witness and corporate finance work since 2000. She is a member of the Academy of Experts, trained as a single joint expert and is an Accredited Counter Fraud Specialist. Fiona specialises in share and business valuation cases with particular experience in the Family Court. She also has considerable experience in commercial disputes, tax disputes and professional negligence matters. In 2023, Fiona was engaged on 75 new instructions including over 50 business valuations. These included businesses in care services, garden centres, property investment, legal services, publishing, technology, chocolate manufacturing and farming. Fiona was ranked in Who’s Who Legal in 2023 where she is recommended as an expert in litigation. Fiona was praised by her instructing clients and peers who said “Fiona gets straight to the key points and is superb at explaining complex matters clearly and simply”.

Fiona Hotston Moore Partner Forensic Services Cambridge & Norwich +44 (0)7770 642 491 fiona.hotstonmoore@frpadvisory.com

Jon Dodge Partner Forensic Services Norwich +44 (0)7775 696 809 jon.dodge@frpadvisory.com

frpadvisory.com

2023: a year in review

Our senior specialist valuation & tax team

Meet the wider specialist team

Elevating excellence: Rob Whitefoot promoted to Director in 2023

Strength in our experienced team

Rob is a Director in the Forensic Services team, based in our Norwich office. Rob is a Chartered Accountant with 20 years’ post qualification experience. He has specialised in valuation work, particularly in the Family Courts, since 2018 and has been a key member of the reporting team in over 50 (often larger and more complex) cases. He is currently engaged in around 20 new valuation cases each year, and his experience encompasses multiple sectors including property and construction (where he has extensive experience); professional services; engineering; sport and leisure; healthcare; transport; distribution; automotive and farming. Rob also has considerable experience in respect of a wide range of tax matters and particularly those relating to matrimonial cases.

Supporting our local experts Fiona Hotston Moore and Jon Dodge, we have a team of qualified accountants who specialise in forensic accounting. The team brings considerable experience and enables our experts to manage a number of cases at any point in time.

Whilst our specialist business valuation and matrimonial tax team is based in East Anglia (working from our Norwich and Cambridge offices), our instructions come from solicitors across the UK.

Rob Whitefoot Director Forensic Services Norwich +44 (0)7552 964 005 rob.whitefoot@frpadvisory.com

Jude Corbett Assistant Manager Forensic Services Norwich +44 (0)7923 221 861 jude.corbett@frpadvisory.com

Ben Lambert Assistant Manager Forensic Services Norwich +44 (0)7706 734 545 ben.lambert@frpadvisory.com

Janet Parker Associate Director Forensic Services Norwich +44 (0)7780 008 055 janet.parker@frpadvisory.com

Matt Field Director Forensic Services Norwich +44 (0)7796 716 078 matt.field@frpadvisory.com

Lucy Day Executive Forensic Services Norwich +44 (0)7355 678 212 lucy.day@frpadvisory.com

Maria Rix Marketing Manager Norwich

+44 (0)1603 703 173 maria.rix@frpadvisory.com

Tom Arnold Senior Manager Forensic Services Norwich +44 (0)7761 749 583 tom.arnold@frpadvisory.com

Jackie Collier PA & Office Manager Norwich

Nikki Rice Administration Executive Norwich

+44 (0)1603 703 173 jackie.collier@frpadvisory.com

+44 (0)1603 703 173 nikki.rice@frpadvisory.com

frpadvisory.com

2023: a year in review

2023: a year in review Introducing our newest team member

Highlights

2023

Meet Lucy

Lucy Day Executive Forensic Services Norwich +44 (0)7355 678 212 lucy.day@frpadvisory.com

What attracted you to joining FRP’s forensic services team? I was interested in forensic work when I heard about it during my studies and thought it would suit me well. As a forensic accountant you are required to write reports alongside financial analysis as well as investigate into a variety of matters. FRP Norwich is a growing office with a number of opportunities which attracted me to the company. What type of work have you been involved in since joining? Since joining I have worked on a number of cases. I have helped produce single joint expert matrimonial reports covering a range of different companies and situations. I have helped with shadow expert reports challenging other single joint experts and producing questions for our clients to ask. I have utilised my studies looking at taxes, disputes, business valuations and specific areas such as cryptocurrencies and share valuations. Lucy joined us in July 2023 as a Forensic Services Executive. Lucy is training to be a Chartered Accountant and previously worked in a regional accountancy practice within the audit team. As our newest recruit, we asked Lucy to tell us a bit more about why she joined us and her experience so far.

2023 was another busy year for our experts and team. We valued businesses in over 40 sectors including IT consultants, property investment, construction, hospitality, car repairs, financial services, farming, dentistry, retail, marketing and consultancy. We also undertook a number of tax instructions providing reports as single joint expert on property and investment assets.

We continued our popular webinar series for family lawyers and this year focused on the new CGT rules and business valuations. We also hosted networking events in Cambridge, Norwich, Birmingham and London.

How does your background in audit assist in forensic services? Auditors have to question the evidence provided and remain professionally sceptical throughout the job. These skills help when completing financial analysis for business valuations and challenging accounts. As an auditor you manage multiple jobs and deadlines which has also helped in my new role. What do you enjoy doing outside of the office? Outside of work I like to keep active going to the gym, running and walking my dog. I love being outside particularly at the beach and taking part in outdoor activities. I also enjoy cooking and baking and experimenting with new flavours and recipes. Do you have any New Year’s Resolutions for 2024? My aim is to continue with my running (which I have recently started) ready for a half marathon in March. I also aim to sign up to some other challenges next year, hopefully including the Three Peaks challenge.

In 2023, our key statistics were:

54 Engagements as single joint expert

New instructions

Partners

Specialist team members

149

40+ Different business sectors

600 Family lawyers attended our two tax webinars

Instructing lawyers

Networking events for family lawyers

frpadvisory.com

2023: a year in review Share indices, transaction activity & economic outlook

Another year of uncertainty & disappointing growth

Economic outlook Despite the UK economy being expected to avoid a technical recession, growth is likely to remain low with a growth rate of 0.3% expected in 2024. The downward revised growth rate reflects the negative impact of inflation and interest rates and their dampening effect on overall investment. Figures show UK economic growth has averaged 0.14% in the last two years. The consistently high inflationary rates have had significant, long-term impact on UK households and businesses. The forecast for the CPI remains unchanged at 5% in Q4 2023. In addition, forecasts suggest inflation will take longer to return to the 2% target level, reaching the goal in the last quarter of 2025. Households are seeing an increase in their incomes in real terms, however the outlook for consumption remains weak. Discretionary spending remains fairly low due to low consumer confidence which despite an increase remains below pre-pandemic levels. Alongside inflation, interest rates remain high and are expected to peak at 5.25% therefore putting downward pressure on growth. Considering the complex economic conditions businesses currently face, it is clear that some sectors have faced challenges whilst some have performed surprisingly well. Rises in European interest rates have been lower than either the UK or US with the UK and US fluctuating relatively in line with one another. Most recently, interest rates in the US have stayed higher than the UK at approximately 4.41 compared to the UK at 4.22. Increased input costs, the withdrawal of government support as well as weaker growth prospects in the household and corporate sectors, have resulted in an elevated risk of insolvencies.

Transaction market Over the past year, the M&A market has faced a slump in deal activity globally as a result of rising interest rates, geopolitical instability and recession concerns. However, as at Q4 2023, M&A activity is showing signs of revival. The first half of the year resulted in a decline in activity with fewer larger deals and a decline in average deal size. However, mid-market deals activity remained more resilient. Gaps in valuation expectations between buyers and sellers continued to feed uncertainty whilst high interest rates made financing deals difficult. However, deal activity has subsequently accelerated, pointing to further strengthening into 2024 as the macroeconomic environment stabilises. All of this points to mixed fortunes for companies and ongoing volatility in the markets and therefore company values. As experts, we will continue to request as much information (both historic and current data) as is proportionate in order to assess the valuation of the companies we are instructed to report on. We also expect to continue to receive requests for updated valuations to reflect changes in business fortunes.

Share indices Over the year to date, the UK FTSE has ranged between index values 8014 and 7257. The economic outlook impacted certain sectors adversely, but other sectors have seen significant increases in share value. In particular, Rolls Royce Holdings Plc, Marks & Spencer Group Plc and Melrose Industries Plc have recorded the highest total returns out of the FTSE 100 companies. Despite significant losses as a result of the global lockdowns, the conflict in Ukraine has resulted in increased spending on defence, heavily benefiting Rolls Royce. However, there have been some heavy falls in the FTSE 100 with companies such as Fresnillo, Entain and Anglo American recording slumps in share prices as a result of volatility and a decline in performance.

0.3% Growth Growth rate expected in 2024. 8014.31 High Highest rate on the UK FTSE in 2023. 5.25% Interest rate Expected peak rate of interest in 2023.

frpadvisory.com

2023: a year in review

Tips from our webinar

How the expert approaches a business valuation as a single joint expert

In September 2023 we delivered our second webinar and looked in detail at how the expert approaches a business valuation as a single joint expert. In this article we cover three of the areas which were considered in the webinar. Key valuation methodologies • Future maintainable earnings: An ‘income approach’ - estimates future maintainable earnings and applies a valuation multiple, being the number of years a purchaser might expect to wait to recover the cost of investment (adjusted for net debt / surplus assets) before taxation. • Discounted cash flow: The ultimate ‘income approach’ which converts future cash flows to a current value using a risk adjusted discount rate. • Asset based valuation: A ‘cost approach’ which values a business based on its net assets with no reference to future performance. • Dividend yield: An ‘income approach’ relevant to minority shareholdings. • Entry cost method: Looks at the estimated cost to set up a similar business from scratch. • Industry precedent: In certain industries an indicative value may be derived from a multiple of income, number of customers or some other industry metric.

Calculation of value of Barbie Ltd adopting capitalised maintainable earnings

Calculation of value of Ken Ltd adopting an adjusted net asset valuation

Maintainable earnings (usually EBITDA)

Net assets in the latest balance sheet

£2 million

£8 million

Revaluation of property / investments to market value

£6 million

Earnings multiple

A x B = C

Latent tax on gains in investment value

Enterprise value

£12 million

(£1 million)

Net cash / debt / working capital / surplus assets

(£2 million)

Obsolete stock

(£1 million)

C +/- D = E

Adjusted net asset value

£12 million

Equity value

£10 million

A, B and D are the key variables to assess...

The initial SJE enquiry - how can you help us? • Size of business - approximate turnover; approximate net assets (balance sheet); or, estimated number of employees. • Complexity and relevant experience - sector / nature of trade. • Any known additional instructions? - e.g. earnings, liquidity, review of bank accounts or additional dates for valuation.

Letter of instruction - what to include?

In addition to all the standard information (background, parties, instructions, compliance), it is immensely helpful to receive a copy of the last company financial statements including the detailed profit and loss account.

• Any deadline for enquiry response?

13 frpadvisory.com

frpadvisory.com

2023: a year in review 2023 client events

Technical webinars and networking events

Fiona Hotston Moore leads our series of popular webinars for instructing family lawyers which in 2023 covered CGT changes and business valuation. Our webinars were attended by over 600 family lawyers. Fiona also led networking events in Cambridge, Norwich, Birmingham and London. The events offered cocktails, canapés, shuffleboard, BBQs and a Christmas afternoon tea and the chance to meet the wider forensic services team. Fiona also visited a number of our FRP offices in the UK and our Cyprus office to meet local contacts.

frpadvisory.com

FRP Advisory

Dencora Court 2 Meridian Way

1 Cambridge Square Milton Avenue Cambridge CB4 0AE

Norwich NR7 0TA

Tel: 01603 703173 | fiona.hotstonmoore@frpadvisory.com | jon.dodge@frpadvisory.com Our experts’ CVs and fee estimates can be provided promptly if required.

December 2023

frpadvisory.com

Page 1 Page 2-3 Page 4-5 Page 6-7 Page 8-9 Page 10-11 Page 12-13 Page 14-15 Page 16

Made with FlippingBook - professional solution for displaying marketing and sales documents online