Coronavirus (COVID-19) has had terrible widespread effects on everyone around the world. The virus was first identified in China in December 2019 and was officially recognized as a pandemic by the World Health Organization (WHO) in March 2020. Ravaging those who have had either direct or indirect exposure, this devastating microorganism has spread to nearly every country and location throughout the globe. Governments and agencies throughout the world have all taken drastic actions to stem the spread of COVID-19. Fully occupied cruise ships have been left on the open seas, unable to find a port to dock. Travel bans to and out of different countries have been put into effect and the movement of people and some goods have come to a virtual standstill.
Life as we know it has been turned on its head. People throughout the world are contracting the disease and many are dying from this horrendous disease. Additionally, the world economy is cratering as millions are laid off and the credit and equity markets crash. With all this doom and gloom, it can cause us to step back and re-assess our situations in our homes, workplaces, and communities.
The bull market that we had been in for over 10 years has came to a screeching halt. We have seen some recent rebound spurred by curve flattening and Fed action, but uncertainty remains. Many of the basic assumptions that business owners and management teams used in the valuation of their business need detailed reanalysis and additional consideration. Public company multiples have plummeted, government-backed debt interest rates are pointedly lower, and M&A markets have stalled as uncertainty is peaking. Business valuation professionals have access to this data and insight into market sentiment across various industries, from start-ups up to some of the largest corporations. Understanding current market trends and dynamics (both micro and macro) can help owners and management teams formulate ideas and strategies to not only survive through these turbulent times, but to come out ahead.
During times of severe economic and political uncertainty, investors and individuals oftentimes let emotions take control of their decision making. Irrationality can have long-lasting, negative effects. An independent valuation can provide assurance and fact-based support, helping to mitigate the deleterious effects that come from a panicked mindset.
Decisions that can be supported by a business valuation include, but are not limited to: hiring, estate planning, mergers & acquisitions, spin-outs, liquidations, evaluations of strategic alternatives, fundraising (both debt and equity), shareholder distributions, recapitalizations, and partnership buy and sell agreements. Many of these decisions become particularly important during uncertain times, and the support and insight that can be provided by an independent business valuation can be the difference between a successful outcome and an unmitigated disaster.