How have business valuations changed since COVID-19?
Business valuations are always tricky to determine, but never more so than in times of crisis.
Valuation methods typically rely on predicted future earnings, EBITDA and cash flow. Projections are rarely accurate, but are even more tricky to establish during the pandemic because we have very little idea of what the continued impact will be. How long will lockdown and social distancing measures last, and how long will the recession endure beyond that?
Public markets have already suffered huge blows, with stock prices dropping up to 25% in the first half of the year, and we may well expect to see a larger dip later down the line if there’s a significant resurgence in covid cases.
All of this volatility and uncertainty means that business owners (who want a high business value) and investors (who want a lower business value) will have an even harder time establishing and agreeing upon a fair market value.