How do we take into account the impact of the Covid years without penalizing the seller during the valuation process. The Covid-19 pandemic has introduced unprecedented challenges and disruptions to businesses worldwide, and it is essential to assess its effects accurately to ensure a fair valuation.
During the webinar, it was highlighted that Murphy Business employs a comprehensive approach to understand the specific impact of the Covid years on a seller’s business. This approach involves a thorough analysis of the company’s financial performance, considering both historical data and more recent data during the pandemic period.
To avoid penalizing the seller for the Covid-related downturn, Murphy Business takes several important steps:
Recasting Financials: The company works closely with the seller to recast the financial statements, adjusting for any extraordinary Covid-related expenses, one-time losses, or non-recurring events. This provides a clearer picture of the business’s true underlying performance, excluding any pandemic-related anomalies.
Analyzing Trends: Murphy Business looks at the pre-Covid financial trends and compares them to the Covid years’ performance. This analysis helps identify any temporary setbacks caused by the pandemic versus long-term issues that might have arisen independently of the crisis.
Factoring in Recovery: The company takes into account the business’s resilience and potential for recovery post-Covid. Understanding the industry’s outlook and the seller’s plans for navigating the post-pandemic landscape are essential in determining the business’s future prospects.
Industry Comparisons: Murphy Business compares the seller’s performance to industry peers and benchmarks, considering the broader impact of Covid on the sector. This provides context for understanding how the business fared relative to others in the same industry.
Market Conditions: The company assesses the local and regional market conditions during the Covid years to understand any external factors that might have influenced the business’s performance.
By employing this meticulous approach, Murphy Business ensures that the seller’s business is fairly and accurately valued, taking into account the unique challenges posed by the Covid-19 pandemic. This approach also provides buyers with a transparent and reliable assessment of the business’s potential for future growth and success beyond the pandemic.