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Valuation Guidelines: The European Initiative LP Summit - May 18, 2005 Paris . Monique Saulnier Managing Partner & CFO. I. Worldwide Environment. Multiple initiatives/4 past years EVCA - March 2001 (Europe) AFIC - Oct. 2002 (France) BVCA - July 2003 (UK)
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Valuation Guidelines:The European Initiative LP Summit - May 18, 2005 Paris Monique Saulnier Managing Partner & CFO
I. Worldwide Environment • Multiple initiatives/4 past years • EVCA - March 2001 (Europe) • AFIC - Oct. 2002 (France) • BVCA - July 2003 (UK) • AIMR (GIPS) - Nov. 2003 (US / worldwide) • AVCAL – Dec. 2003 (Australia) • PEIGG –Dec. 2003 (US) • AICPA – Dec. 2003 (US) • AFIC-BVCA-EVCA – Jan. 2005 (Europe)
Conform to international accounting standards (implementation of the Fair Value Concept) Willingness in Europe to come up with only one set of guidelines Consultation document released in Jan. 2005 Final document released on March 16, 2005 II. An AFIC, BVCA, EVCA Joint Initiative
Prescriptive vs principle driven No reporting Guidelines Does not address corporate governance issues III. Comparison with March 2001 EVCA Guidelines
Conservative Value no longer recommended Conservative value + fair market value no longer recommended III. Comparison with March 2001 EVCA Guidelines – Unquoted investments (consistency with Fair Value)
VC: write-ups possible on the basis of positive events (use of extreme caution) Discount bands of 5% possible instead of 25%. New methodologies recommended III. Comparison with March 2001 EVCA Guidelines – Unquoted investments(consistency with Fair Value)
III. Comparison with March 2001 EVCA Guidelines – Unquoted investmentsValuation Methodologies • Price of Recent Transaction • Earnings Multiple • Net assets • DCF (of underlying business) • DCF (from the investment) • Industry valuation Benchmarks • The Valuer should exercice their judgment to select the most appropriate methodology for a particular investment.
IFRS/Gapp compliance => Last bid price on an active market and no marketability discount Outside of accounting principles compliance => bid or mid-market price and marketability discount III. Comparison with March 2001 EVCA Guidelines – Quoted investments
IV. Next steps….. • Other European and non European PE associations invited to join • Endorsement by other associations • Independent board to: • • Monitor IFRS & US Gaap • • Answer questions from members • • Recommend evolution of guidelines
To download • the AFIC, BVCA, EVCA Valuation Guidelines: • In English • www.privateequityvaluation.com • In French • www.afic.asso.fr