Title: A Shifting Perspective: How Pandemic-Related Changes to the Macro Environment Have Impacted Business Valuation, and How Professionals Can Adapt Their Practices in Response.
Author(s) : Daniel Hebert, Katie Matt
It is axiomatic that the COVID-19 pandemic has affected the business environment on both the micro and macro levels. The pandemic has affected the global economy, supply chains, distribution, employment, and customers’ buying practices. Businesses across various industries have modified their operations in response. Professionals must understand how changes in the business environment can impact a business and adapt their valuation practices accordingly. In light of the pandemic, a business valuation should include the following considerations: economic uncertainty from the decreasing U.S. GDP; how these uncertainties fit within Revenue Ruling 59-60; the proper premise of value; which valuation methodology to employ (and when); whether uncertainties in the business environment should be disclosed in the Management’s Discussion and Analysis (MD&A) within Form 10-K; and pending legislation that could impact a business’s revenue or liabilities. These factors should produce a valuation that is more accurate, holistic, and reflective of the business environment.