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Factoring COVID-19 into the Valuation Equation

CPAs & Business Consultants

Michael Oliphant
Michael Oliphant, CPA, CVA CPAs & Business Consultants

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As Carter (see, From Fraud to Pandemic: How Valuators Handle Subsequent Events) demonstrates, the valuation date is a critical decision when valuing a business. It typically coincides with the subject company’s quarterly or annual financial statement date. For that reason, December 31 is a common cutoff for data that’s used to value calendar-year businesses, especially for smaller entities that don’t issue interim statements.

Experts consider external market conditions on the valuation date when valuing a business. Today, the novel coronavirus (COVID-19) outbreak is a developing crisis that’s having an ongoing effect on many types of businesses. What exactly was “known or knowable” about COVID-19 as of December 31, 2019 (or March 31, 2020)? To answer this question, consider how hypothetical investors would have perceived the situation on the valuation date.

The following timeline provides insight into what public knew on various dates through April:

Timeline of COVID-19-Related Milestones

December 31, 2019 – April 16, 2020

December 31, 2019

China reports to the World Health Organization (WHO) that there was an outbreak of pneumonia from December 12 to December 29 in Wuhan, China.

January 7, 2020

The WHO identifies the virus as a novel coronavirus.

January 21, 2020

Officials in Washington state confirm the first case in the United States.

January 30, 2020

The WHO declares the COVID-19 outbreak a public health emergency.

February 24, 2020

U.S. stock markets plunge for the first time over COVID-19-related fears.

March 6, 2020

The number of COVID-19 cases hits 100,000 globally. President Trump signs an $8 billion COVID-related relief package.

March 11, 2020

The COVID-19 outbreak is officially upgraded to a pandemic by the WHO.

March 13, 2020

President Trump declares a national state of emergency. Several U.S. states announce plans to close schools.

March 15, 2020

Guidance from the Centers for Disease Control and Prevention recommends canceling or postponing in-person events of 50 people or more in the United States for the next 8 weeks.

March 16, 2020

President Trump advises Americans to avoid gatherings of 10 or more people, going out to bars and restaurants and discretionary travel. U.S. stocks plunge (again).

March 18, 2020

President Trump signs the Families First Coronavirus Response Act into law, providing COVID-19-related health care treatments and financial relief measures.

March 27, 2020

President Trump signs the Coronavirus Aid, Relief, and Economic Security (CARES) Act, providing individuals and businesses with roughly $2 trillion in financial relief. The federal guidelines on social distancing are extended until April 30.

April 2, 2020

The U.S. Department of Labor (DOL) released new figures that show more than 10 million Americans filed for unemployment benefits in March.

April 15, 2020

The U.S. Department of the Treasury starts issuing Economic Impact Payments.

April 16, 2019

President Trump announces plans for gradually reopening the U.S. economy on a state-by-state basis.

April 24, 2020

President Trump signs the Paycheck Protection Program and Health Care Enhancement Act, providing an additional $484 billion in funding for small business loans and grants, hospitals and COVID-19 testing.

April 30, 2020

The DOL announces that U.S. unemployment filings in the past six weeks have reached 30 million.


There is universal date for determining when COVID-19 was known or knowable. COVID-19 probably wasn’t on the radar for most U.S. businesses or investors at year end. Notable events for businesses operating in the United States might include January 30 (when the WHO declared COVID-19 a public health emergency, February 24 (when the stock markets first experienced a major decline), March 16 (when Trump issued social distancing guidance), and March 27 (when the federal government passed a massive financial relief package).

It’s important for valuators to evaluate economic conditions within the subject company’s industry and region, too. The pandemic has devastated many industries, such as airlines, hotels, restaurants and specialty retail. But some companies — such as distilleries, delivery services and grocers — are struggling to keep up with surging demand. In addition, some parts of the country have suffered more financial distress from COVID-19 than others — and the timing of the outbreak may vary regionally.

There’s no one-size-fits-all approach to estimating the short- and long-term financial impacts of the pandemic. Many variables remain unclear in the midst of the crisis. Contact Yeo & Yeo’s valuation professionals to determine what’s appropriate in your situation.

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