Our International Valuation Newsletter series addresses current hot topics and upcoming themes. While some articles may focus on particular sectors or asset classes, all will have one thing in common: The provision of insights into the development and practical implementation of solutions to common challenges when valuing businesses and business assets. The newsletter is therefore of interest to those involved in valuations for transactions, financing, tax, accounting, restructuring and dispute resolutions, among other areas. It is also highly relevant to academics, lawyers and government or tax authorities.

As you undoubtedly have also felt, we are shocked to witness how swiftly the COVID-19 pandemic has developed and led to fundamental shifts in both our professional and personal  lives.

We decided to skip our last Quarterly brief’s release, which was planned for the end of March 2020, as the topics of valuation and price had become so uncertain by then. In the meantime, much has been published regarding this topic. See, as an example, KPMG’s collection of COVID-19 publications and webinars: Maintaining business continuity in unprecedent times.

In this Q3 edition, we discuss how the pandemic places an unprecedented threat and burden on our personal health, healthcare systems, societies, political systems and our global economy. This crisis is unlike others, being a global economic crisis causing fundamental disruptions in global supply chains as well as in the demand for goods and services. A global recession appears unavoidable, and will likely come with a financial crisis.

We compare share prices, analyst consensus forecasts and beta factors by sector, using a timeframe of ‘before’ and ‘after’ COVID-19, in an effort to interpret and recognize the outbreak’s effects on these valuation key focus areas, even as the situation continues to evolve.

We also summarize key challenges to anticipate when developing supportable valuations, as even the most sophisticated valuation approaches undoubtedly will struggle to eliminate the uncertainty of their results in an environment like today’s. Additionally, we provide recommendations when identifying and challenging areas of probable weakness in valuations, as these are notoriously complex in times of crisis.

In the final section, we cover the most recent capital market data for selected markets in our usual format. Here are the latest developments at a glance:

• Major stock market performances: The MSCI World, DAX and SMI showed little movement, indices of other European countries lost a significant portion of their value (-16.9% to -21.4%), with the NASDAQ outperforming all (+25% over the past 12 months).
• EURO STOXX 600 sector multiples: Valuation multiples decreased across all sectors, emphasizing that the multiple for information technology fell only by 0.6x.
• Current risk-free rates for major currencies: Interest rates fall again, as central banks started to ease their monetary policies in response to the COVID-19 outbreak.

We hope you stay safe, healthy and have a pleasant summer as we look forward to discussing your questions regarding valuation trends and practices during these unprecedented times.

Read the full document here below.