How do you revise restructuring valuations?

1 Review the inputs

The first step is to review the inputs of your valuation, such as the financial projections, the discount rates, the multiples, and the recovery rates. You need to assess whether they are still realistic and consistent with the latest information and market conditions. For example, you may need to adjust the revenue growth, the operating margins, the capital expenditures, or the working capital assumptions based on the performance and outlook of the company and its peers. You may also need to update the cost of capital, the comparable companies, or the industry benchmarks based on the changes in the risk profile, the valuation multiples, or the sector trends.

2 Test the scenarios

The second step is to test the scenarios of your valuation, such as the base case, the downside case, and the upside case. You need to evaluate whether they capture the range of possible outcomes and the key drivers of value. For example, you may need to modify the scenarios based on the impact of the restructuring plan, the potential restructuring alternatives, or the external factors such as the macroeconomic environment, the regulatory changes, or the competitive landscape. You may also need to perform sensitivity analysis or Monte Carlo simulation to quantify the uncertainty and variability of your valuation results.

3 Compare the outputs

The third step is to compare the outputs of your valuation, such as the enterprise value, the equity value, the implied share price, and the valuation ratios. You need to analyze whether they are reasonable and aligned with the objectives and expectations of the stakeholders. For example, you may need to compare your outputs with the market prices, the trading multiples, the transaction multiples, or the historical averages of the company and its peers. You may also need to reconcile your outputs with the different valuation methods, such as the discounted cash flow, the market approach, or the asset-based approach.

4 Validate the assumptions

The fourth step is to validate the assumptions of your valuation, such as the growth rate, the terminal value, the discount rate, and the capital structure. You need to justify whether they are supported by the facts and evidence. For example, you may need to provide references, sources, or citations for your assumptions based on the industry reports, the analyst estimates, the company disclosures, or the market data. You may also need to document your assumptions and explain your rationale and methodology in your valuation report.

5 Communicate the findings

The fifth step is to communicate the findings of your valuation, such as the key takeaways, the implications, and the recommendations. You need to present whether they are clear and convincing for your audience. For example, you may need to use charts, tables, graphs, or visuals to illustrate your findings and highlight the main points. You may also need to use language, tone, and style that are appropriate and persuasive for your audience, whether they are internal or external, technical or non-technical, friendly or hostile.

6 Monitor the feedback

The final step is to monitor the feedback of your valuation, such as the questions, the comments, and the reactions. You need to respond whether they are timely and accurate. For example, you may need to address the feedback in your presentation, your report, or your follow-up communication. You may also need to incorporate the feedback in your next revision or update of your valuation, if necessary.