COVID-19: Strategies for a Lower Valuation World
Sanjay Gandhi shares an article that discusses strategies for companies and High Net Worth families and individuals that can provide a silver lining amidst the tough news and provide long-term benefits when valuations rise again.
The coronavirus (COVID-19) has resulted in significant public market losses, as reflected in daily stock market gyrations and volatility. Private companies, asset and debt values have equally been affected by the pandemic. For High Net Worth individuals and companies, certain strategies can provide a silver lining amidst the tough news and provide long-term benefits when valuations rise again. For many private holdings, COVID-19 will provide some downward impact on value. This can result from significant disruption in operations, revenue/margin drop off, challenges in accessing capital, slower growth and delayed exit timelines. Certain direct impacts can already be seen as the market for secondary sales has started to shrink. Another immediate impact is revision of near and medium-term cashflow projections.
COVID-19 is a “Material Disintermediating Event”
For valuation purposes, we often consider past performance when looking at value. This can include recent financing rounds or historical financial performance of a company and market transactions/sales of companies. However, COVID-19 is a “material event” which can disrupt the assumption that historical data points are presumptively the foundation of the future.
This triggers the need for a fresh look to consider the value of a company in light of its prospects in current and future economic circumstances.
Key points include:
- Top strategies
- Factors impacting valuation
- How to estimate forward-looking performance?
Read the full article, Smart Strategies in a Lower Valuation World, on OxfordVP.com.