FMV PART 3: BANKRUPTCY ASSET VALUATION METHODS

The concept of fair market value is central to bankruptcy asset valuations. As such, bankruptcy asset valuation methods affect every part of the reorganization or liquidation process.

REVIEW OF VALUATION BASICS

As per the authoritative bankruptcy valuation paper, “Valuation Methodologies: a Judge’s View by US Bankruptcy Judge Christopher S. Sontchi (Chief Judge, D.Delaware), a company and/or its assets can be valued in one of four ways (as paraphrased in this section, below):
1. Estimation of current asset values, typically using liquidation value or replacement value;
2. Discount of expected cash flows (DCF);
3. Relative value analysis of comparable companies / assets; and
4. Contingent event assessment. Continue reading “FMV PART 3: BANKRUPTCY ASSET VALUATION METHODS”