Deal or no deal?
Jinfo Blog

8th October 2010

By Tim Buckley Owen

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Bureau van Dijk’s new Valuation Catalyst represents yet another example of an information provider moving away from simple data supply towards tools to support decision making. But it raises the question: Should information suppliers be liable for the decisions their customers take as a result? Valuation Catalyst assists with the company valuation process by pulling data in from BvD’s range of company financial products (including the relaunched Zephyr mergers & acquisitions database), finding up to 50 peer companies to the one under investigation and 50 comparable deals. Then it pushes the data through a variety of models to produce a range of valuations for the target company (see http://digbig.com/5bcpbc for details). BvD has a long history of applying analytical capabilities to the company data it supplies and ensuring comparability between data prepared under different accounting regimes. On this occasion it has teamed up with Dr Maria Carapeto, M&A expert at London’s Cass Business School, to ensure that the models it uses are as robust as possible. So no doubting the quality of the product – but should either BvD or Cass be liable for the results? The company’s MD for UK & Ireland, Tony Pringle, is quite clear that it’s not; BvD is not offering opinions, he explains, merely applying the technology to the content – and in any case, it has very carefully drawn contracts with its customers. An equivalent principle applies to Bloomberg’s newish rating service, which will feed public information into a quantitative tool to calculate a debt issuer’s relative creditworthiness. Since Bloomberg, too, won’t be offering an opinion, it doesn’t intend to request certification from the United States Securities & Exchange Commission (see http://www.vivavip.com/go/e29046 for background). Another BvD Catalyst, FACT, does something not dissimilar, integrating external rating models with its own company financial data and analysis to help companies manage their credit risk – but again offering no opinion (http://digbig.com/5bcpbd). When it comes to the specialist credit rating agencies, however, there are plenty of people who’d like to see them held responsible for the valuations they offer. Not that that will be easy. At a meeting of the European Council of Ministers recently, the Polish finance minister Jacek Rostowski ridiculed his Belgian counterpart Didier Reynders for suggesting that agencies could be fined if their ratings were ‘inappropriately harsh’, asking him if he’d also fine them if their ratings were too optimistic (http://digbig.com/5bcpbf). Nevertheless the agencies already face stringent new regulation either side of the Atlantic (see http://www.vivavip.com/go/e19183 and http://www.vivavip.com/go/e22305 for background) and there is at least a predisposition in official circles towards actual sanctions. Holding other content providers liable for the consequences of their data manipulation may be a long way off – but it can’t be ruled out entirely.

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