Valuation of one-off government subsidies during Covid-19

by a searcher from INSEAD

2 years ago

Dear search community, 

I'm currently negotiating the company value for a business that received substantial government subsidies as Covid-relieve measure which boosted EBITDA. 
I'm wondering whether this subsidy needs to be adjusted for in the EBITDA-baseline? You could argue that this is clearly non-operational. At the same time, the loss in revenue caused by the lockdowns was also an outside-effect. Any experience or thoughts on how to handle this?

Thanks a lot in advance, 
Philipp

2 likes
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44 comments

searcher from University of Queensland

Good point, thanks

9 months ago | like reply | 0 likes

investor from Northwestern University - Kellogg School of Management

I think you'd need to look at what occurred operationally during the period in which they received the relief. If the business was shut down during the period or had some sort of revenue loss, I would normalize payroll spend if possible. However, there were plenty of companies that received a 2nd PPP loan after things had returned to normal so that should be adjusted out as if it was never received

2 years ago | like reply | 1 like

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