More scrutiny of private-equity fund valuations

BVWireIssue #142-3
July 23, 2014

Expect a heightened focus on valuation practices and procedures of private equity funds, according to an article in the New York Law Journal. This is due to recent enforcement actions by the Securities and Exchange Commission, including an audit program and settlements with funds concerning alleged overvaluations. Also, investors are becoming more concerned about fund valuations.

Valuation op: For example, the article points out that institutional investors are putting more scrutiny on valuation of portfolio investments held by private equity funds in which they are limited partners. They now use interim valuations as a gauge for the fund manager’s overall selection and management of the portfolio’s investments. Also, they use these valuations in making asset allocation decisions, in co-investments by related funds, and in manager retention. Because of this, there is “potential increased interest in the retention of independent valuation firms to conduct annual or more frequent valuation of significant portfolio company investments,” says the article.

Extra: Attend a webinar, Private Business Appraisal Opportunities with Private Equity Portfolio Companies (July 23), featuring Summer Parrish (Valuation Research Corp.). This is Part 3 of BVR's Advanced Webinar Series on Valuations for Business Transactions and addresses the intersections of private business appraisal and private equity portfolio companies, including the valuation of share-based compensation granted to management in connection with a private-equity transaction and assignments related to financial reporting requirements.

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