The Dark Side of Valuation: Valuing Young, Distressed, and Complex Businesses, Second Edition

Conclusion

Looking across the life cycle, the firms at either end of the life cycle seem to pose the most valuation challenges—sometimes for the same reasons. If the question with young firms is whether they will survive to become profitable businesses, a key issue with declining firms is whether they will survive deteriorating operations and large debt obligations and emerge as going concerns.

In this chapter, we looked at the interplay between decline and distress to develop a framework for valuing declining companies. When decline is irreversible, but distress is not imminent, we argued for valuing the firm twice—once as a going concern, and again in an orderly liquidation—and using the higher of the two numbers. When the decline is attributable ...