Vol 15 (2018) - Issue 3

Article preview

The Valuation of Companies in Distress

Introduction
Questions of value frequently arise in resolving the future of companies in distress. The value of almost any company depends on expectations about future performance. Uncertainty about the future of a particular business therefore leads to uncertainty as to its value. Uncertainty about the future performance of distressed companies is often acute, which makes valuing them difficult. In this article we consider how valuers seek to deal with uncertainty as to the value of a company in distress. First, we briefly describe how a company or business valuation is performed. Second, we explain how distress affects the value of a business. Third, we describe practical challenges which arise when valuing a distressed business and consider how they can be addressed.