The Potential Impact of COVID-19-Induced Volatility on Business Valuation in M&A and Bankruptcy Litigation

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The authors assess the impact of COVID-19-induced volatility on company valuations in this Law360 article.

In M&A and bankruptcy litigation, experts commonly use two methodologies to value companies, discounted cash flow (DCF) analysis and relative valuation analysis. These methods require careful assessment of the valuation inputs. This article assesses the impact of COVID-19-induced volatility on inputs, in particular, financial forecasts and discount rates.

To put the impact of the current market situation into context, authors Frank Schneider, Allie Schwartz, and Diego Vega San Martin compare the current volatility in these inputs to that during the financial crisis. Their findings suggest that in certain sectors valuation inputs may be hotly contested in future litigation disputes.

This article was originally published by Law360 in November 2020.


The views expressed in this article are solely those of the authors, who are responsible for the content, and do not necessarily represent the views of Cornerstone Research.

The Potential Impact of COVID-19-Induced Volatility on Business Valuation in M&A and Bankruptcy Litigation

Authors

  • Boston

Frank Schneider

Vice President

  • New York

Allie Schwartz

Vice President

  • New York

Diego Vega San Martin

Associate