Suggested Reading:
The International Valuation Standards Council’s (“IVSC”)^ Technical Boards issued a special letter in March 2020 providing guidance on conducting valuation under uncertain times, given the impact of Covid-19 on businesses and in particular on valuations.
Mergers and acquisitions (“M&A”) transactions across the world have slowed down significantly as the COVID-19 crisis continues to persist. According to Refinitiv data, global M&A activities plunged 28% in the first quarter to its lowest level since 2016...
Covid-19: Private Equity Portfolio Valuation Considerations
By: Adrian Cheow, Executive Director & Practice Leader, Deal Advisory, FCCA 
Avinaash Ravi, Senior Manager, Deal Advisory, CAIA
Covid-19 continues to extract significant healthcare and economic cost globally. Private equity investors have been impacted in many ways. Given the heightened uncertainty in the market, general partners have shifted their focus from making new investments to stabilising their portfolios. Understanding how the value of their portfolio companies have changed due to Covid-19 is a key aspect of managing the risk and return of their portfolios.
Due to restrictions imposed by governments to tackle Covid-19 and due to changes in people’s behaviours, the performance of some of the portfolio companies has been poorer than previously forecast. Consequently, they are facing liquidity issues. To alleviate this, they are looking to raise cash. Funds that have already made investments in these companies will have to decide if it’s worth making these additional investments. Here too, valuation is important.
In this article, we present four considerations relating to the valuation of these private equity investments under uncertain times.
In particular, it may now be necessary to:
1. review the salient terms of the investments;
2. review whether the planned exit scenarios and their probabilities are reasonable;
3. review whether the planned exit timelines are achievable; and
4. explore ways of calibrating the valuation model.
Download Covid-19: Private Equity Portfolio Valuation Considerations
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