International Valuations Newsletter International Valuations Newsletter

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.

Not only has COVID-19 exposed the fragility of our global economic and social systems while the global climate crisis escalates, it has also accelerated existing trends in various areas in an unexpected and, in many cases, constructive way. An illustration of this is the remarkable increase in awareness of ESG (environmental, social and governance) in recent months in the public forum, private sector, and finance.

A new peak has been reached through a combination of progressive change in consumer behavior towards sustainable products and services, investor demand for financial assets with positive ESG factors, and actions by governments to support sustainable businesses and finance, in particular in light of pandemic-related stimulus programs. These factors positively reinforce each other to create exponential growth in momentum.

While the introduction of ESG to portfolio and investment decision-making has been accelerating, the challenge of how to properly reflect ESG in financial valuations remains a largely unexplored area in academia and practice. This edition of our newsletter suggests an approach to viewing business valuations through an ESG lens.

We undoubtedly recognize that ESG-related questions do not solely address the long-term value creation for companies’ shareholders but rather the holistic value impact beyond the bounds of financial considerations, for all stakeholders, i.e. the global society. However, in the pages that follow, we focus on business value as a core decision indicator for management.

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: We saw negative returns for some European indices, e.g. the FTSE 100 at -14.3% and the IBEX 35 at -15.5%. NASDAQ however gained more than 43%.
• S&P Eurozone BMI Index sector multiples: Over the past three months, EV/EBITDA multiples increased for 10 out of 11 sectors. Surprisingly, the EV/EBITDA sector multiples for Health Care have fallen since December 2019 (- 0.9x).
• Risk-free rates: Compared to 31 December 2019, the risk-free rates of all considered currencies decreased.
  

We wish you health and happiness in the year ahead and look forward to discussing your questions regarding valuation trends and practices in 2021.

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