Like most vibrant markets, Valuations is ever evolving. It’s being shaped by a number of different factors, and these influences are expected to continue to change the future of the valuations market on a global scale for some time to come.
So, what are they? And how can you prepare? Read on as we share our predictions for future trends that will help you to navigate the changeable landscape of Valuations.
Trend 1: The Influence of Technology
Technology’s a game-changer in the valuation industry. Advanced analytics, machine learning, and AI are rapidly transforming how valuations are conducted.
Deloitte shares, “Facing growing scrutiny, some innovative corporate filers are investigating the use of data analytics to help make valuation activities and financial reporting disclosures more transparent, supportable, internally consistent, and efficient…they are making strategic investments, such as in data analytics, to mirror the emphasis and actions of regulatory authorities.”
According to a recent article by CRED iQ, assets have seen an average of 41.2% decline in valuation from the original appraised value. This indicates a growing reliance on data-driven decision-making. Using real-time market data, historical trends, and industry benchmarks are all examples of how technological advancements are redefining the valuation landscape.
And similarly in the world of start-ups, data science is increasingly being used to predict valuations. As highlighted by Gaper.io, AI and machine learning are enabling more accurate predictions of a start-up's potential value, making it easier than ever for investors to make informed decisions.
As tech develops further, the outlook is an even more accurate, compliant, and data-led approach to valuations.
Trend 2: Regulatory Changes
Regulatory changes are another major force shaping the future of valuations. Driven by a variety of factors - from increasing concerns about financial stability to market transparency and investor protection - we predict amendments in industry standards and regulations will continue to significantly impact valuations across various sectors.
As a current example, let’s consider the declining number of public companies. This is a development that's likely to impact business valuation, forensic accounting, and financial forensics consulting. And a trend that may prompt a potential shift towards more innovative, data-driven, and private market-focused valuation methodologies. With fewer public companies to use as comparables for valuation, there may be a shift towards different valuation methodologies, triggering regulatory changes to ensure these new methods meet standards of fairness and accuracy.
But alongside this, regulators might consider updating their rules to better accommodate the changing landscape. For instance, they might ease certain standards to make going public more attractive or introduce new regulations for private markets to ensure investor protection.
When considering every angle that regulatory changes could come from, the only thing that’s certain is change. According to Kroll, “Policymakers are grappling with an economic, geopolitical, and regulatory polycrisis,” so it looks as though regulatory revisions are par for the course. Valuations specialists will need to remain vigilant and adaptable to stay ahead.
Trend 3: Economic Shifts
Economic shifts are significantly impacting the valuations market. The extraordinary M&A activity and valuations witnessed in the past years are set to wane, leading to a buyer's market. Sellers could face difficulties, and as a result, we’re expecting to see an influx of innovative strategies and approaches to valuations.
In conjunction with this, the banking sector is set to expand its definition of value from currency to include trust, simplicity, speed, empathy, safety, and sustainability. And this trend could suggest the roll-out of a broader perspective on valuations in general, that goes beyond just monetary worth.
And we can’t overlook recent inflation increases and higher interest rates, increasing company debts, reducing profitability, and heavily impacting valuations.
The Future of Valuations
Technology. Regulatory changes. Economic shifts. These trends will all manifest uniquely across the globe and in line with the specific economic and regulatory contexts of each region. For instance, Brexit's implications on the UK's economic landscape could result in significant changes in asset and business valuations. And similarly, in the USA, the evolving regulatory environment under the new administration and the SEC, will likely alter how boards, investors, auditors and other stakeholders operate.
It's crucial to keep a close watch on these economic indicators to make informed decisions. Whether you’re an investor, business owner or valuations professional, Apollo Solutions is deeply embedded within the valuations market and can help you reach your valuation goals. Contact us today to talk more about the market and your specific needs.
