UNQUOTE

EUROPE - Delving into fair value

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With the recent market turmoil and lack of comparables, fair value remains a complicated accounting principle. In a recent video interview, Nordic unquote" editor Rikke Eckhoff discusses the implication of this principle for the industry with PricewaterhouseCoopers partner Nick Rea.

Earlier this year, the International Private Equity and Venture Capital ("IPEV") board released an update to its valuation guidelines for the industry, the aim of which is to ensure consistency with the US GAAP and IFRS.

Notably, it reinforced that fair value is the market price if the asset were to be sold in "an orderly transaction […] between market participants." What does this entail for private equity fund managers? Rea recommends that buyout houses aim to determine what multiples the company would obtain if it were to be sold today.

As Rea states in the interview, "Nobody is saying that it's easy - there is no right answer," but, he adds, "there are a range of reasonable outcomes," that all fund managers should be able to arrive at with proper consideration.

The full video interview is available on www.unquote.com

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