How is a company's valuation conducted during restructuring?

A company's valuation during restructuring is comprehensive and multifaceted. This process involves assessing a variety of critical factors that contribute to its overall financial health and viability going forward. The correct method incorporates a thorough examination of the company's assets and liabilities, which provides a snapshot of its current financial position. Additionally, future earnings potential is assessed to gauge how the company might perform in the market after restructuring. This is crucial because it allows stakeholders to estimate the company's capacity to generate revenue and sustain operations in the future.

Considering both current stability and future growth potential enables a more accurate and realistic valuation. By doing so, stakeholders – including creditors, shareholders, and management – can make informed decisions regarding the restructuring process. Each of these elements plays a significant role in forming a reasoned and effective strategy for navigating financial difficulties, ultimately leading to a more sustainable business model.

In contrast, methods that focus narrowly on just future earnings, solely on historical performance, or primarily on board opinions would fail to capture the nuanced reality of the company's situation. They would overlook significant liabilities and current assets that are essential for a holistic understanding of the company's worth during restructuring.