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IPEV Board publishes updated International Private Equity and Venture Capital Valuation Guidelines

January 2016

 

The International Private Equity and Venture Capital Valuation Guidelines Board (“the IPEV Board”) has published the 2015 edition of the International Private Equity and Venture Capital Valuation Guidelines.  

 

In 2015 the IPEV Board consulted on amendments to the IPEV Valuation Guidelines. The IPEV Board periodically updates the Valuation Guidelines to give effect to changes in accounting standards and enhancements in best practice. The last revision to the Valuation Guidelines was in December 2012. With three years of experience applying IFRS 13, and with continued experience applying ASC Topic 820, it was deemed appropriate to update the Valuation Guidelines at this time.

 

The IPEV Board undertook this update to improve the readability of the Valuation Guidelines by incorporating additional commentary and formatting changes to signpost content.  In addition, a number of technical clarifications have been added that include:

 

  • an update on the International Accounting Standards Board’s (IASB) deliberations on the interpretation of the Unit of Account concept when valuing investments;

  • clarifications on how to consider the value of debt for the purposes of determining the value of equity;

  • differentiation between earnings multiples and revenue multiples;

  • removing the negative bias towards discounted cash flow techniques in the previous guidelines and highlighting accounting guidance on the number of valuation techniques to consider;

  • expanded discussion on changes in valuation techniques, calibration, backtesting and the use of multiples; and

  • further content in the guidance on specific considerations, including non-control minority positions.

 

Neil Harding, IPEV Board member and Director, Fund Investor Relations at 3i said:

 

“The IPEV Valuation Guidelines continue to be a valuable source of guidance for industry practitioners across the world that is both practical and principles-based. Compliance with the Valuation Guidelines is typically sought by investors, acknowledging the Guidelines’ role in addressing the more technical challenges associated with valuing private equity and venture capital investments.”

 

Stephen Kempen, IPEV Board member and Funds Administration Director at Apax Partners, commented:

 

“The 2015 edition of the Valuation Guidelines brings together the cumulative experience of industry professionals and developments seen over the past three years. As a board, we hope the additional interpretive and application guidance will provide practitioners and investors alike with a robust framework for carrying out and reviewing valuations.”

 

David Larsen, IPEV Board Vice Chair and Managing Director at Duff & Phelps, added:

 

“The IPEV Board is grateful for all of the comments received as part of the consultation process. The Board carefully considered the feedback submitted and has incorporated certain suggestions where it was deemed appropriate. In response to some of the comments received, the IPEV Board plans to update the FAQs section of its website in due course.”

 

NOTES TO EDITORS

 

1. The IPEV Board and Valuation Guidelines

 

The mission of the IPEV Board is to provide high quality, uniform, globally acceptable, best practice guidance for private equity and venture capital valuation purposes.

 

The IPEV Board was created as an independent body in 2005 and is responsible for maintaining, promoting, monitoring and updating the IPEV Valuation Guidelines. The Board has an advisory role and gives guidance on the application of the Guidelines to all stakeholders in the private equity and venture capital industry including practitioners, investors, regulators and auditors. More information about the IPEV Board can be found here.

 

2. IPEV Valuation Guidelines – 2015 edition

 

The 2015 edition of the International Private Equity and Venture Capital Valuation Guidelines is available here.

 

3. Contact details

 

For further information, please contact:

 

David Larsen, IPEV Board Vice Chair at david.larsen@duffandphelps.com or;

Stephen Kempen, IPEV Board member at Stephen.Kempen@apax.com