The war in Ukraine, lingering effects of the pandemic, inflation and other macroeconomic and geopolitical factors are hitting all at once but fair value determinations still depend on individual business and operational factors, valuation specialists said in a Kroll webcast last week.
The uncertainty caused by the war and the spike in energy costs it’s unleashed, among other things, can make the market seem a lot like the beginning of the pandemic two years ago, when executives and investors struggled for a clear picture of what was happening.
But the environment today is less like the beginning of the pandemic and more like the later months when it became clear COVID-19 was creating winners and losers rather than bringing everybody down equally.
“At the time there was so much uncertainty,” said Ryan McNelley, managing director and portfolio valuation leader for the European market at Kroll. “The prevailing view was it would impact everybody to a similar degree but what we learned was the impact was more spotty. As we sit here in 2022 … what we’re hearing from our clients is it’s much more case-by-case than it was two years ago.”
Even for companies that have exposure to the Russian oil and gas industry, which is reeling from Western sanctions and government-mandated disinvestment, it would be a mistake to simply write down valuations to zero in the belief calculating a fair value is impossible.