What’s in line for valuations in 2025?
December 17, 2024
The easy answer is that its going to get busier and more complicated.
I hope you are having a good run up to Christmas. Our workload is a direct function of the work you have on, so I believe you must all be absolutely rammed. There is nothing like a deadline is there?! We have been working until the small hours and at weekends to meet our clients’ deadlines. Roll on the holidays! Although we will still be available just in case an urgent valuation is needed. You can call me on 07736676 212 or email me at modwenna.rees-mogg@athlacapitalmanagement.com.
2024 has been a busy year for Athla; we have seen our workload quadruple in the last 12 months and the team has more than doubled.
We have valued everything from A shares to Usufructs, with work coming in from 20 different law firms. We have also started to do valuations of overseas companies, as well as UK assets, shares and companies. It is increasingly common for us to handle tricky valuations where there is also an urgent deadline; a challenge we always relish!
Our new long-awaited valuation software solution is now within sight of launch. I can’t wait to demonstrate it to you in the New Year. It will make us even faster and more transparent in the work we do and will open up new avenues for providing valuation solutions. But more about that in 2025…
In addition, we are increasingly finding that an initial valuation exercise leads to a client needing more advice. In 2025 we anticipate being asked more frequently to work with a firm’s legal advisers to ensure that the cap table is structured appropriately for all eventualities and also to assist with how to achieve strategic growth (which usually means M&A or raising capital for green field initiatives).
One area where I believe we could add enormous value to clients is in estate planning. We understand that a company will not be required to release cash to pay a shareholders’ Inheritance Tax liability. However, that does not mean you should avoid knowing what a company and its shareholdings are likely to be worth at probate. Why? Because HMRC will want to be paid the IHT owing on the shareholding and, if necessary, will insist that other assets in the estate are disposed of to meet the bill. We don’t want widows or widowers losing their home to pay the IHT on a shareholding held by their spouse.
If you have a lot of EIS and other similar investors and would like us to host a webinar to explain to them why they need to worry about probate and tax, let us know. We have the answers to the questions they had not thought to ask, at our fingertips.
Generally, we think the outlook for business in the UK in particular is benign in 2025. We have a stable if not very popular government, inflation is not expected to leap out of control, interest rates may fall and the government is investing in major industries (from defence to infrastructure and construction which will force cash into the economy). Overall, the value of companies will rise on this tide. VC land will remain less predictable in comparison. What the VC Investor Hope Premium will be by the end of 2025 is something I dare not predict.
The drag of the US will continue to impact on the UK economy. Maybe the tariffs Trump wants to impose will be lower than the papers suggest, but with a firm majority in both the House of Representatives and the Senate, there is a clear mandate to “Make America Great Again”. Where we need to use US multiples to obtain a valuation we will have to contextualise this around the premium that a US company can command over a UK one.
There is a sense of despondency around the UK stock market. I want the stock market to thrive. It is an intrinsic part of the UK’s economic health. However, if it continues to shrink, as valuers, the opportunity for identifying quoted comparable multiples reduces too. I anticipate that we will be relying more on unquoted M&A multiples and will be forming a plan to help companies create board approved 5-year forecasts so that we can perform reliable DCF valuation exercises.
Next year we are hoping it will also be a year of meeting you in person. Lockdowns are, thankfully, a long and distant memory. We will be in touch in the New Year, but if you would like to pre-empt a call do let us know when you will be around.
