Tangible, intangible, or worthless?

Tangible, intangible, or worthless?

Ben Honeywood, director in KPMG’s Private Equity Group, who has recently transferred to Jersey from London, gives some practical thoughts on the new changes to valuation reporting guidelines and the changing commercial landscape within the PE industry impacting valuation.

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Changing, landscape, jersey, ci

Time for the quarterly investment valuation approvals again…. are you up to speed with the latest PE valuation guidelines? … are you aware of the key macro-economic issues impacting the assets you are valuing?

Despite spending the past three years walking the streets of Mayfair, working with a number of high profile buy out, venture and fund of fund houses, I still find many PE valuations challenging to conclude on.

Whilst invariably the maths behind the valuation is simple, the underlying judgements remain the corner stone in any valuation. As we see a continued slump in commodity prices, a potential BREXIT and volatility in core Asian markets, such judgements are harder to draw now than ever. 

December 2015 saw the latest incarnation of the International Private Equity Valuation (IPEV) Guidelines, which are updated to clarify a number of components, rather than re-invent the wheel. There are some components relevant for valuation committees and NED board members which I will discuss in this article.

 

Key points include:

  • DCF is no longer to be avoided
  • Back testing of past performance
  • Does control result in value uplift?
  • When is a loss making transaction worthwhile?

 

 

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