New International Valuation Guidelines: A Private Equity Homerun!

19 Pages Posted: 30 May 2006

Date Written: May 2006

Abstract

A year ago, in March 2005, the new International Private Equity and Venture Capital Valuation Guidelines were launched. Though this launch was already a great success for what some had called a "Mission Impossible", it was at that time still quite uncertain whether the industry participants would accept and use them. In this paper, we provide the results of the survey we conducted within more than 200 funds in our portfolio on their expected adoption and on their accurate use of these new guidelines. These results clearly demonstrate the wide acceptance and use of these guidelines in Europe, i.e. a real "Private Equity homerun". In addition to that we tried to assess their impact on the funds' interim performances. For our portfolio, it appears that the introduction of the guidelines impacted positively the return of our portfolio and allowed to show earlier "fair values". This was mostly noticeable for buyout funds while venture capital funds did not appear to have been significantly impacted. This analysis also gives preliminary indication of a higher correlation between public indexes and reported funds valuations. Finally, we discuss the implications for Limited Partners and explain why we believe that, though valuations of the portfolio companies are now "fair", modelling and liquidity forecasting at the fund level are still required for proper portfolio management.

Keywords: Private Equity, Venture Capital, IFRS, IAS 39, International Valuation Guidelines

JEL Classification: G24

Suggested Citation

Mathonet, Pierre-Yves and Monjanel, Gauthier, New International Valuation Guidelines: A Private Equity Homerun! (May 2006). Available at SSRN: https://ssrn.com/abstract=901926 or http://dx.doi.org/10.2139/ssrn.901926

Pierre-Yves Mathonet (Contact Author)

European Investment Fund ( email )

43, avenue J.F. Kennedy
Luxembourg City, L-2968
Luxembourg
+352 42 66 88 343 (Phone)
+352 42 66 88 410 (Fax)

HOME PAGE: http://www.eif.org

Gauthier Monjanel

European Invesment Fund ( email )

Luxembourg City, L-2968
Luxembourg
+352 42 66 88 424 (Phone)
+352 42 66 88 410 (Fax)

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