Previously we discussed the before Covid-19 and during Covid-19 periods.
This will be characterized by the removal of social distancing requirements and a return to “normal” (Phase 4 of BC’s Restart Plan).
We expect business results will improve substantially after Covid-19 relative to the during Covid-19 levels.
The world after Covid-19 will be different in certain ways. Examples include:
These shifts will impact the value of affected businesses. While we are monitoring these trends, at this point, the impacts are largely unknown. As such, we generally do not factor any such shifts into our valuations. As time progresses and these trends and their impacts become more evident, they will be factored into valuations as appropriate.
From a valuation perspective, traditional cash-flow based approaches will generally continue to be most appropriate for valuing operating businesses (although this is assessed individually for each business). As the value of a business is in its future cash flows, the majority of value of an operating business with intangible value (goodwill) will relate to the after Covid-19 period. This remains true even for valuation dates during Covid-19.
In addition to executing our normal valuation process, where practical, we are taking the following additional steps:
These are some questions you should consider when advising your clients and working with valuators: