The International Private Equity & Venture Capital Valuation Guidelines Board has issued special guidance for applying the IPEV Valuation Guidelines when estimating fair value at 31 March 2020. IPEV states that, while the alternative asset industry is robust, the COVID-19 crisis ‘has impacted more people, more businesses, more rapidly than any crisis in recent history.’

The special guidance addresses equity and debt investments as well as limited partnership interests and includes a specific caution regarding business valuations that ‘double dip.’

Care should be taken not to ‘double dip’ with respect to valuation inputs—if performance metrics have been adjusted to consider lower expected performance, an appropriate multiple should be applied rather than a multiple derived from comparable public companies whose results have not yet included lower expected performance. The same concept applies when using the income approach. If future cash flows have been adjusted, the increase in the discount rate may be less than the increase in the discount rate if cash flows have not been adjusted for the impact of the crisis.