Fair value measuring in the private equity industry
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- Master Thesis 
The objective of this thesis is to address the question of how fair value reporting is implemented in the private equity industry, and how good fair value estimates (FV) are compared to the intrinsic value of the investments measured by the transaction price. Further, the value relevance of book values (BV) and FV has been examined across type of investment and valuation method. My data sample shows that the industry’s FV are underestimated in 75 % of the cases. The average deviation from the transaction price achieved in the market is -25 %. Multiples appear to be the most accurate method to use when assessing fair value. On average, multiples have a -14 % deviation between FV and transaction price. The regression analysis has shown that both BV and FV are value relevant, but FV are more value relevant than BV. In addition, BV is more value relevant for venture companies than other companies, while non recognized goodwill is less value relevant for venture companies.