One of only 44


I’m not big on alphabet soup. But, in valuing non-public companies and advising their owners, there are three designations that really matter: Certified Public Accountant (CPA), Chartered Financial Analyst (CFA), and Accredited Senior Appraiser (ASA) in business valuation. These are not designations for the sake of designations. Each covers a body of knowledge that differs in major ways from the bodies of the other two designations; there is almost no overlap between any of them. At this writing, only 44 professionals have all three:

The CPA is all about accounting and, especially, what’s called ‘GAAP’ (Generally Accepted Accounting Principles). This is essential because the accounting in small-and-medium-sized enterprises (SMEs) can be quite shoddy. Anyone who values such ventures should know a lot about the nitty-gritty of accounting. The CPA credential is also one of the world’s great brands. So, the brand and the nitty-gritty accounting knowledge required to pass the four tests that becoming a CPA requires are why I became a CPA.

The CFA designation focuses primarily on the techniques and nuances involved in the financial analysis and valuation of public enterprises. These ‘buy-side’ analysts work for banks, pension funds, mutual funds, etc., that invest in public companies around the world. Most sell-side analysts work for private-equity funds and other institutions that own or have sizable stakes in non-public ventures. One can also encounter the CFA designation after the names of those who manage investment funds. Although the CFA is not nearly as well-known as the CPA designation, it is a demanding regimen. I know many CPAs who tried to obtain the CFA credential, but couldn’t get through the three all-day tests the latter requires.

Finally, there is the Accredited Senior Appraiser (in business valuation) designation. The ASA focuses on the valuation of non-public companies. These valuations require the analyst to consider public-companies that might be good ‘proxies’ for the non-public company the analyst is valuing. These valuations also require the analyst to define what constitutes ‘sufficient similarity’ in the context of a public-company being a proxy for a private one. In addition, because the overwhelming majority of public companies are far larger than the typical private, the analyst must be able to create ‘size-adjusted valuation multiples’ that, in essence, transform the valuation multiples for a $5 billion public company into one that looks like a $5 million private one. This is difficult, demanding work. Anyone who thinks otherwise is either far smarter than the typical private-equity analyst or has never valued a non-public company using public-company comparables or doesn’t know what s/he is talking about.