COVID - 19 Business Valuations. What happens now?
With turmoil and great uncertainty in the financial markets, forced business closures and mass unemployment, the question arises as to how can a business valuation be produced at the present time that is meaningful, transparent and defendable?
It is difficult not to compare the COVID-19 situation with that of the GFC. The GFC led to a deep recession followed by a slow recovery as households and financial institutions repaired their balance sheets. The coronavirus is likely to trigger material falls in output in affected economies over the next quarter but, provided that the virus fades, activity should rebound as supply constraints are lifted. This rebound should be very quick.
As far as business valuations are concerned, the most technically correct method of valuation is the discounted cash flow (DCF) approach. Utilising this method, it is possible to integrate the material changes COVID-19 has on the business and produce a reliable valuation, with special diligence given to the selection of discount rates. Usually most discounted cash flow business valuations are prepared utilising yearly financials. However, there is no reason at all why they can’t be prepared utilising monthly financials resulting in a very reliable, transparent and up to date business valuation.
As part of any current valuation, I would strongly recommend a further valuation set just before the outbreak of COVID-19.
The principle of Business Reports and Values, Lee Goldstein, has been involved in Business Valuations since 1985. He holds the following qualifications:
Double Major Degree in Accounting and Finance
Diploma in Forensic Accounting
Graduate Diploma in Valuation
Advanced Certificate of Business
Advanced International Certificate in Intellectual Property.
Lee has conducted numerous intellectual property valuations covering a diverse range of industries, and is often called upon to provide expert testimony in judicial matters. Lee has valued businesses and intellectual property worth over $350,000,000.
Lee Goldstein has been the Triennial Certificate holder and Licensee of a Business Broking Company since 1992