Tom Angell, Practice Leader of Withum’s Financial Services group discusses what the SEC wants to see from valuation methodology.
Tom Angell, Practice leader of Withum’s Financial Services Group, discusses the best practices for valuation methodology. An important factor is that funds have an investment valuation policy in place and that it is used consistently in practice year over year. The valuation methods should focus on estimating the fair value of the different classes of equity-based on future payouts at the time of an expected exit/ liquidity event.
Trends show that regulators want to see that valuations are calibrated. To the original purchase price methodology. The current fair value should take into account the original purchase valuation. For instance, if you matched your price against a multiple of a public comp and that public comp multiple increases then your valuation should increase by the same percent.
While third party valuations may be appropriate for larger funds, smaller funds may have the expertise in house to model and value the investments, without having a third-party valuation performed.
Learn more about Withum’s Financial Services team and expertise here.
