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What ADOPT Training does
ADOPT Training provides training in how to value:
- Acquired intellectual property, other intangible assets and Goodwill
- Businesses
- Share-based payments including employee share options with complex performance conditions, convertible shares associated with specific buy-and-build strategies, etc.
- Complex financial instruments such as floating-strike look-back options embedded in convertible loan facilities and collateralised debt obligations (CDOs)
Why ADOPT Training was founded
Valuation of share-based payments:
ADOPT Training was set up during 2005 to provide training in how to value employee share options and other share-based payments. Companies are required to value such liabilities in accordance with the requirements of the UK's new accounting standard, FRS 20 and its international accounting standard equivalent: IFRS 2: Share-based payments. The intention was to provide training both in the UK and in other countries for accountants and other financial executives to learn how to perform such valuations. The use of option pricing theory and stochastic modelling is generally required for such valuations rather than the more familiar discounted cash flow analysis techniques.
Valuing businesses and acquired intangible assets:
Having established ADOPT Training during 2005, however, the main demand from accountants, investment bankers and other financial executives was for training in how to value acquired intangible assets and intellectual property, and how to value businesses. Valuing businesses tends to be linked to either buying or selling of a business, while the need to value acquired intangible assets is driven primarily by the need to comply with requirements of the new accounting standards, IFRS 3: Business combinations and IAS 38: Intangible assets and goodwill. Occasionally, however, there is a need to value patents or trademarks (i.e. intellectual property) for licensing purposes or in preparation for a sale or purchase.
Valuing complex financial instruments:
Even prior to the recent dramatic turmoil in the financial services industry, restrictions on bank lending had encouraged many firms to sign up to convertible loan facilities offered by finance houses and boutiques, particularly in the Asia-Pacific region. Regrettably, the embedded options proved difficult for both the companies involved and even certain branches of the "Big Four" accounting firms to value, with the result that many companies ended up paying a high price indeed for these loan facilities. More recently, mispricing of collateralised debt obligations, CDOs, involving the bundling of sub-prime mortgage assets in the USA triggered the progressive collapse of a number of large banks on a world-wide basis, causing a severe credit crunch.
Stochastic modelling techniques which capture the complexity involved tend to be the most practical way to value such complex financial instruments. However, the reporting of such values has been compromised by an overly simplistic emphasis on reporting a single point value, namely the mean or average value, accompanied by a potentially very misleading statement with the errors inherent in the calculation of that single point number. By running the stochastic model a very large number of times, the error associated with the mean value can be reduced to any small number. The risk profile of the instrument itself, however, remains largely unaffected by the number of times the stochastic model is run, with the frequency distribution curve for the calculated values merely appearing as a successively smoother-looking curve.
Locations
ADOPT Training is based in the United Kingdom but routinely provides training courses in other countries, world-wide. ADOPT Training’s workforce also routinely undertake valuations for other valuation firms with international clients or else for firms with UK-based clients with both domestic and international operations.