An Objective Perspective - Business Valuations Post COVID-19, The Impact of Fear, Uncertainty and an Economic Downturn

by an investor from Curtin University - Curtin Business School

3 years ago

Has the concept of “Fair Market Value” changed in a the post- Covid19 economy? 
Post 2 of 5 today goes into the aspect of having an objective perspective with consideration to “Fair market value.”
See today's post here:  The Objective Perspective

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5 comments

investor from University of Colorado at Boulder

PE firms were paying a lot less than 7-8x in the early days. Not that different from search funds, at least for private firms. With time those multiples went up and hit 8x for middle market firms and 12x for large ones.

3 years ago | like reply | 0 likes

intermediary from Boise State University

I like your post and agree with your comment: regarding the valuation changing because the business and its prospects have changed post Covid###-###-#### Those prospects could be good or bad. In fact, sales multiples don't change all that much. over time and changing economic circumstances. What does change are the earnings that the multiple is applied to. That's what most buyers (and sellers) misunderstand.. The value of the company is based on earnings (or EBITDA, or SDE or some other earnings stream) and the reliability of the earnings stream continuing. If the earnings go up, the value goes up. If the earnings go down, the value goes down. $2,000,000 x 2 = $4,000,000. $1,000,000 x 2 = $2,000,000. The value changed but the multiple stayed the same. As you said, "The valuation has changed because the business and its prospects have changed not because it was “expensive” before and is now “cheap”.

3 years ago | like reply | 1 like

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