Finance and corporate accounting are two of the most competitive fields in the world. With millions of new business graduates entering the workplace every year and individuals from other fields making a move to finance and accounting as well, it will only become more difficult to gain an edge.
More and more individuals are finding that a bachelor's degree isn't enough anymore, finding employers look for additional certification before hiring. While many are familiar with the "big" finance professional designations, such as the Chartered Financial Analyst (CFA) or Chartered Accountant (CA), few are aware of a fast-growing designation offered in Canada that focuses on the even faster-growing field of business valuation: the Chartered Business Valuator designation.
History of the Designation
The CBV Institute, or Canadian Institute of Chartered Business Valuators, was founded in the 1971 by a group of valuation professionals. It was founded following the introduction of a capital gains tax in the country, which would lead to an increased need for business valuation. Since that time, the Institute has grown by leaps and bounds, with nearly 3,100 CBVs and students in 2019. CBVs must adhere to a strict standard of professionalism, along with a code of ethics, both of which are reviewed and updated to meet the highest standards. Due to the nature of the work (which we will discuss later on in this article), it is of the utmost importance that CBVs remain impartial, to provide truly fair estimates of valuation.
Before being eligible for the CBV designation, potential candidates must first have a post-secondary degree, or CMA, CA, CGA, or CFA designation. Potential candidates must then complete a program of studies that is made up of six courses; four core courses that cover business and securities valuation, along with a law and taxation course and a list of electives that can be chosen by the candidate to round out his or her course line-up.
The course of studies is intended to be a two-year endeavor; however, registered students can take as many courses per semester as they wish. As a plus for CFA charterholders, the CBV Institute offers a two-course exemption from its private and public company courses, allowing CFA charterholders to only have to complete four of the required courses. Additionally, Americans who hold the equivalent designation of ASA-BV, provided by the American Society of Appraisers, can be exempted from certain requirements.
Along with the coursework, CBV registered students must also meet the work experience guidelines, which mandate a minimum of 1,500 suitable work experience hours before the candidate is eligible to write the entrance exam. While the definition of "suitable" is not black and white, one can visit the CBV Institute website for details on what type of work is eligible.
Once all of these prerequisites are satisfied, registered students can then sit for the membership entrance exam, which covers all areas of valuation the hopeful students will have studied and encountered in their work experience leading up to the exam.
What to Expect From the CBV Exam
Offered only once annually, the exam is four hours in length and is delivered in case study form. The areas tested include sections from the pre-requisite courses the registered student will have completed during the program. Of course, business valuation methods and examples will be important parts of the examination. Still, more qualitative sections, such as issues faced in valuation and professional conduct guidelines, are also important to an exam writer's success.
Practice and sample exams are available, and soon-to-be writers would be well-served to review these before entering the actual exam to get a sense of what to expect on exam day. Overall, the belief among those questioned is that a registered student should put in at least 100 hours of study time to be successful.
While CBVs will gain a large amount of experience in fields outside of true business valuation while making their way through the program, business valuation is still the greatest and most apparent skill obtained. Valuation techniques will include discounted cash flow estimation, comparable business evaluation, and the transactions approach. The key driver of business valuation is cash flow and EBITDA because one can usually place a value on a business as a function of the growth rate of its future cash flows. This is only true for profitable businesses; however, since businesses with negative earnings cannot be valued using such an approach. In these instances, students will be taught how to use multiples (EBITDA/EV, EV/R, etc.) of comparable public firms or those paid in the purchase of a similar business, to place an estimated value to the business.
With the designation come opportunities to enter into areas of finance that students may not have had the ability to work in previously. Much like CFA charterholders or Chartered Accountants, CBVs are not necessarily pigeon-holed into working in any one industry. Although their expertise lies in the valuation of private and public firms, CBVs will also have a strong background in taxes, financial forecasting, and data analysis. CBVs today are employed in accounting firms, investment banks, pension funds, private equity, and venture capital firms, and corporate advisory businesses.
For those interested in working in private equity or underwriting the next big IPO, the CBV designation gives you the educational background and real-world prerequisite experience to succeed in those highly competitive fields. The opportunities for CBVs in the areas of finance and accounting are great and only growing.
The Bottom Line
While most will choose to pursue a CFA or professional accounting designation to augment their formal education and work experience, the CBV designation may offer you a specialization that may not have entered your mind and can help differentiate you as an applicant.