Has the corner finally turned for private company valuations?
July 16, 2024
After months and months of bad news, it appears that the slump in fundraisings is over and this should impact on valuations
I enjoyed reading this upbeat article on Yahoo news from TechCrunch. Valuations of startups have quietly rebounded to all-time highs. Some investors say the slump is over. (yahoo.com).
It’s heartening to see that the funding markets are reopening and in the last few days the sense of optimism about the opportunity that is the UK is palpable.
We have never been busier and are hiring to grow our team to keep up with demand. On that note if you are aware of anyone with a Masters in Finance, Statistics or similar who is looking for an interesting, rewarding and intellectually satisfying career, please ask them to send a CV.
An increase in fundraising valuations is not the full answer to most valuation exercises. We watch the quoted markets closely to understand sentiment and to get data points. M&A activity also matters and we’ve just acquired access to a very high-quality data set, which gives us lots more data on M&A deals throughout the UK overtime. That is already proving very useful.
And whether it’s a time of hubris or nemesis, we always bear in mind that to prepare an open market, arms’ length valuation we also have to think about fundamental truths. The old adage that most companies are worth 3-8x EBITDA, always provides a sense check.
The number and variety of valuations we have been working on in the last few weeks have been even more interesting than usual.
Increasingly in the area of employee incentive schemes, companies are becoming more sophisticated.
Even at the beginning of the year, the norm would be a request for an EMI scheme valuation. Recently we have worked on several valuations which have involved EMI schemes, unapproved share option schemes and growth shares for the same company simultaneously. We also have experience of EBTs and JSOPs which have their own quirks when it comes to setting the value of different interests.
A key issue that really matters, when valuing companies in this context, is how integral the individual’s presence at and impact on the company is or will be. If the employee incentive scheme is integral to them outperforming, we have to take that into account. Before it is in place, there are obviously more risks to value being created than once the scheme is established.
Do call us if you have a client who has a valuation need. Although valuations work around employee schemes is a staple activity of ours, we also work on probate and probate dispute valuations, valuations around IHT planning, those for corporate re-organisations and similar, M&A scenarios and in litigious situations. No valuation is too small or large for us to handle and as you know we specialise in being accurate, comprehensive and fast, with the report itself being in written in plain English.
