A special edition (fifth) of the “European Capital Market Study” from ValueTrust was released last week. The study, written by Professor Dr. Christian Aders, Florian Starck, Benedikt Marx, and Marion Swoboda-Brachvogel, provides business valuers with another source of trading multiples and total shareholder returns across a wide range of industries. It also includes a comprehensive compilation of capital market parameters such as cost of capital and implied as well as historical risk premiums for European countries.

ValueTrust finds that the risk-free rate has dropped to 0.11% as of 31 March. In addition, the ‘implied market return (ex-ante) for the European market increased from 7.8% as of December 31, 2019 to 9.1% as of March 31, 2020, mainly caused by a severe decline in market capitalizations in March 2020.’ Of critical importance to business valuers, ‘the market risk premium rose from 7.6% to 9.0%, mainly due to the increase of the implied market return.’

ValueTrust usually releases this study on a semiannual basis, but, ‘given the current COVID-19 crisis and the associated declines in market capitalization and revision of analyst forecasts, we release an additional study as of March 31, 2020 in order to give decision-makers guidelines with regard to current valuation parameters,’ the authors say.