Valuations in Uncertain Times
VRC’s financial reporting, portfolio valuation, financial opinion, tax reporting, and complex securities professionals are continuing to counsel clients and monitor the markets and economic environment to proactively discuss impacts and solutions with clients.
Continued Updates and Coverage
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Fairness & Solvency Opinions: Transaction Transparency
In up and down markets, businesses of all sizes, types, and industries must grow to survive and thrive. Pursuing strategic growth will likely entail a business combination, leveraged buyout, divestiture, among other means. This also requires a qualified, third-party valuation firm to help boards of directors support its deal-making decisions, mitigate risk, withstand scrutiny, and improve shareholder transparency.
Typical transactions triggering the need for a fairness opinion include:
- Synergistic mergers or acquisitions; Divestitures
- Tender offers including leveraged buyout (LBO), management buyout (MBO), or other going-private transactions
- Large block stock purchases; Private placements; Down-round financings
- Related party transactions; Transactions with competing offers; Transactions restricted by a bond indenture
- Dividend recapitalizations; Reorganizations; Hostile takeovers
Company boards may seek to obtain an outside solvency opinion for:
- Leveraged buyout (LBO) deals where leverage is significant
- Public company share repurchase programs
- Dividend recapitalization transactions
- Reasonably equivalent value or capital surplus testing
- Corporate spin-off
A solvency opinion rendered at the time of a transaction is one of the most cost-effective ways to mitigate the risks.
Questions About Valuation Impacts?
Visit our Contact Us page to submit your questions, concerns, or details about an upcoming valuation engagement need. A VRC valuation professional will reach out to you upon receiving your inquiry.
Middle Market Credit Spreads and Required Returns
In Q4 2020, market participants noted improving comfort with company and industry fundamentals, outlooks, and the ability to weather a second wave of the virus.
SPAC Shares Are Not Created Equal
How do you value a SPAC? With a surge in SPAC IPOs resulting from the COVID-impacted economy, SPAC valuations should not be given equal consideration.
Private Markets Took COVID in Stride
The private equity and credit markets held up remarkably well in the face of a global pandemic and are adjusting to the “new normal.” Market participants should go into 2021 with heightened vigilance as the impacts of the pandemic may not have yet entirely played out.
In Flux: The Current State of Goodwill & Impairment
As public companies enter the traditional fourth-quarter impairment testing period, two big question marks are hanging over the market.
Q3 Economic Snapshots
Our latest data graphics provide you with an at-a-glance visual summary of the current economic and financial indicators.
COVID & U.S. Portfolio Securities Valuation
The impact of the coronavirus on financial markets has been breathtaking. Investor fear in the capital markets quickly went “viral,” which led to a rush for liquidity and retail fund-led widespread selling. This selling spree occurred first in the public equity markets and then the bond and loan markets. The last time we saw downside volatility of this magnitude in the public markets was the 2008/2009 Great Recession.
Economic Obsolescence
Identifying, measuring, and applying the adjustment for EO can be a complex and iterative process.
Private Equity & Debt Capital Markets Adjust to the New Normal
As we head into Q4 2020, the new normal in private capital markets has fully set in, generally defined by prudence and caution, albeit a work in progress.
Private Credit Market Update
Private investors had much better information to work with for their second-quarter valuation processes than in Q1. Yet, it remains a struggle to determine how much weight to give COVID-influenced financial metrics from preceding months, how to handicap management forecasts for the second half of the year, and how to interpret volatile price data from public equity and credit markets.
BDCs Lean Heavily on VRC for Guidance on Navigating COVID Fallout
In Q3 2020, secondary equity and credit markets rebounded, primary equity and levered finance markets reopened, and the price of risk declined.
A 50-Year Vintage: Rule 2a-5, Fair Value Obligations
In Q3 2020, secondary equity and credit markets rebounded, primary equity and levered finance markets reopened, and the price of risk declined.
New World Order Valuations
A prudent recap and opinion on the proposed steps the SEC is taking toward modernizing fund valuation guidance.
COVID-19: Measuring Triggering Event Impacts and Subsequent Impairment Testing
In Q3 2020, secondary equity and credit markets rebounded, primary equity and levered finance markets reopened, and the price of risk declined.
+ How to Determine if an Interim Impairment Test is Required
COVID Impact on Non-Control Equity Holdings
Some of the most significant financial consequences of the novel coronavirus will be seen in both current and coming company disclosures. Accurately identifying the potential triggering events for the impairment of goodwill and other assets, in light of COVID-19, is a necessary approach that companies should take now with their trusted partners.
SEC Proposed Rule 2a-5: There's No Time Like the Present
Some of the most significant financial consequences of the novel coronavirus will be seen in both current and coming company disclosures. Accurately identifying the potential triggering events for the impairment of goodwill and other assets, in light of COVID-19, is a necessary approach that companies should take now with their trusted partners.
Impairment Barometer: Update Aug. 31, 2020
The SEC’s timing in announcing proposed Rule 2a-5 comes when an emphasis on valuation in the wake of market disruption by the novel coronavirus has never been more important. An in-depth review of virus-related market events coupled with an examination of their internal fair value policies, procedures, reporting, and recordkeeping related to those proposed under Rule 2a-5 may serve fund advisers and their boards well.
An Orderly Repricing of Risk in Private Debt
In Q3 2020, secondary equity and credit markets rebounded, primary equity and levered finance markets reopened, and the price of risk declined.
Q2 Economic Snapshots
The impact of the coronavirus on financial markets has been breathtaking. Investor fear in the capital markets quickly went “viral,” which led to a rush for liquidity and retail fund-led widespread selling. This selling spree occurred first in the public equity markets and then the bond and loan markets. The last time we saw downside volatility of this magnitude in the public markets was the 2008/2009 Great Recession.
SEC Requires Third-Party Fairness Opinion Certificate for BDCs
The impact of the coronavirus on financial markets has been breathtaking. Investor fear in the capital markets quickly went “viral,” which led to a rush for liquidity and retail fund-led widespread selling. This selling spree occurred first in the public equity markets and then the bond and loan markets. The last time we saw downside volatility of this magnitude in the public markets was the 2008/2009 Great Recession.
COVID & Portfolio Securities Valuation
The SEC, as a response COVID-19, provided temporary exemptions to BDCs to issue and sell senior securities if they are “unable to satisfy the asset coverage requirement under the Investment Company Act of 1940 (the Act) due to temporary mark-downs in the value of the loans to such portfolio companies.” This SEC order is in effect until 12/31/2020.
COVID-19: Spotlight on Goodwill Impairment Testing
The impact of the coronavirus on financial markets has been breathtaking. Investor fear in the capital markets quickly went “viral,” which led to a rush for liquidity and retail fund-led widespread selling. This selling spree occurred first in the public equity markets and then the bond and loan markets. The last time we saw downside volatility of this magnitude in the public markets was the 2008/2009 Great Recession.
Industry Index Discounted Spreads in Valuations
Is the novel Coronavirus a triggering event and should it be addressed for Q1 or Q2 2020?
Anxious Times for Financial Statement Preparers Worried About Goodwill Impairment
Is the novel Coronavirus a triggering event and should it be addressed for Q1 or Q2 2020?
Valuation Considerations Relating to Section 382 Limitations
The impact of the proliferation of coronavirus cases on financial markets is creating challenges for companies attempting to wrap up quarterly reporting. On top of concerns about the outlook for the economy and implementation of the CARES Act, companies with goodwill on the books are questioning whether they need to test for impairment and, if so, what parameters to adjust in a rapidly changing environment. VRC Co-CEO PJ Patel briefed financial reporting and SEC professionals on how companies are dealing with impairment questions in Q1 and planning for Q2.
Tracking the Socioeconomic Disruption of the Pandemic
The impact of the coronavirus on financial markets has been breathtaking. Investor fear in the capital markets quickly went “viral,” which led to a rush for liquidity and retail fund-led widespread selling. This selling spree occurred first in the public equity markets and then the bond and loan markets. The last time we saw downside volatility of this magnitude in the public markets was the 2008/2009 Great Recession.
The Impact of COVID-19 on Private Equity
The impact of the coronavirus on financial markets has been breathtaking. Investor fear in the capital markets quickly went “viral,” which led to a rush for liquidity and retail fund-led widespread selling. This selling spree occurred first in the public equity markets and then the bond and loan markets. The last time we saw downside volatility of this magnitude in the public markets was the 2008/2009 Great Recession.
Portfolio Securities Valuation: Understanding the Impacts on Credit Spread
Despite the unprecedented nature of the current economic crisis, lessons from past market disruptions can be helpful. The most frequently cited point of comparison—perhaps simply because of its proximity in time—is to the global financial crisis of 2008. That’s understandable—it’s only natural to look back at the most recent market dislocation for takeaways about the current one. But as we consult with clients in the private equity space about the impact of the pandemic on their business and portfolio company valuations, we’re finding it every bit as useful to reflect on another period of market extremes, the heady days of the dot-com economy.
Valuation Essential to Restructurings, Bankruptcies
The impact of the coronavirus on financial markets has been breathtaking. Investor fear in the capital markets quickly went “viral,” which led to a rush for liquidity and retail fund-led widespread selling. This selling spree occurred first in the public equity markets and then the bond and loan markets. The last time we saw downside volatility of this magnitude in the public markets was the 2008/2009 Great Recession.
Bulls vs. Bears vs. COVID-19: How do Control Premiums Change?
Many businesses hit hard by COVID-19 shutdowns may need to restructure through an out-of-court workout, Chapter 11 reorganization, or Chapter 7 liquidation. In all cases, an objective valuation is a critical component.
Impact on Midstream Energy Companies Will Take Time
Many businesses hit hard by COVID-19 shutdowns may need to restructure through an out-of-court workout, Chapter 11 reorganization, or Chapter 7 liquidation. In all cases, an objective valuation is a critical component.
+ What Does the Oil Price Collapse Mean for Energy Companies?
Adopting Fresh Start Reporting when Emerging from Bankruptcy
As midstream companies consider the impact of the pandemic, their concerns range from immediate questions of intangible asset impairment to longer-term questions about structural impacts on the market.