Introduction
The distress of a company disrupts not only its operations but also the perception of its value in the eyes of executives, investors, and partners. Whether it is a sale, restructuring, or transfer, the evaluation of a distressed company requires a rigorous methodological approach, sensitive to both economic reality and legal, patrimonial, or tax issues. At XVAL, we assist several hundred executives each year in these contexts, with the mission of providing an accurate, reasoned, and opposable valuation, essential for securing strategic decisions and preserving the company's future.
Understanding Company Distress: Context and Consequences on Valuation
Company distress is most often manifested by cash flow tensions, an inability to meet obligations, or resorting to collective proceedings such as safeguard, recovery, or judicial liquidation. According to the latest report from the Banque de France Observatory, France recorded over 55,000 company failures in 2025, mainly SMEs and micro-enterprises (source).
In this context, the valuation of the company cannot be limited to a classic exercise. Traditional methods must be adapted to account for the crisis situation, increased risk, and possible interruption of activity. The goal remains to produce a fair, defensible, and usable evaluation both in the context of negotiation and before a court or tax administration. It is precisely to meet these multiple challenges that the firm XVAL deploys recognized expertise and proven analytical tools.
Particularities of Valuing a Distressed Company
Valuing a company in distress differs in many ways from valuing a company in a growth or stability context. The main challenges encountered include:
- Uncertainty about the continuity of operations: it is essential to assess the company's ability to continue its activities or achieve a turnaround.
- The impact of debts and off-balance sheet commitments, often underestimated in a superficial approach.
- The valuation of tangible and intangible assets, frequently affected by the crisis situation.
- Time pressure, linked to collective proceedings or emergency negotiations.
At XVAL, each mission undergoes a preliminary diagnosis to qualify the nature and degree of difficulty and adjust the methodology accordingly. This ensures a tailored approach that takes into account both regulatory constraints and the specific expectations of the executive or their advisors.
Valuation Methods Adapted to Company Distress
Several methods are commonly used in the valuation of a distressed company, including:
1. Asset-based approach (NAV)
This method involves assessing the value of net assets re-evaluated (NAV), considering actual debts and necessary adjustments (provisions, depreciation, off-balance sheet commitments). It is essential when future profitability is uncertain or when activity is at risk of being halted. At XVAL, the thorough analysis of the balance sheet and commitments helps avoid the pitfalls of undervaluation or artificial inflation of assets.
2. Discounted Cash Flow (DCF) Method
In a distress context, the DCF must incorporate cautious scenarios, taking into account the risks of declining activity, restructuring, and loss of customers. The assumptions must be justified and documented, particularly regarding the ability to generate positive cash flow. A higher discount rate is generally used to reflect the increased risk.
3. Market Multiples and Sector Comparables
Comparison with recent transactions or companies in the same sector, adjusted for the specificities of the distressed company, provides a useful benchmark. However, the relevance of comparables must be assessed with caution and requires a thorough understanding of the local and sectoral economic fabric, a recognized asset of XVAL due to its unique database on the French market.
4. Mixed Approach and Valuation of Isolated Assets
In the case of liquidation or asset sales, it is crucial to evaluate each component of the assets (real estate, equipment, brands, clientele, etc.) separately and anticipate the discount related to a rushed sale. XVAL's experience in business asset valuation ensures these analyses are secured across various sectors, including retail, hospitality, and regulated professions.
For further insights into the specific approaches to valuation in crisis situations, also consult the complete guide for executives published on Wispra.
Strategic and Legal Issues for Executives
Valuing a distressed company carries significant strategic implications, both for the business leader and for their financial partners, investors, or legal advisors. Among the main issues:
- Securing a transaction: whether it is a sale to a third party, an internal takeover, or an industrial partnership, setting a fair and defensible price conditions the success of the operation.
- Objectifying a negotiation between partners: during a separation or capital conflict, only an independent and reasoned valuation can prevent paralysis and disputes.
- Justifying a value to the tax or judicial administration: the opposability of the report and methodological rigor are essential to avoid subsequent adjustments or disputes.
- Preserving confidentiality and responsiveness: two major requirements in a crisis period, which XVAL commits to respecting through rapid and secure handling of files.
Recent feedback shows that a valuation prepared in haste, without sectoral analysis or justification of assumptions, often leads to costly disputes or challenges to the operation (example Banque de France). According to the annual study by the Federation of Service Providers to Businesses, in 2026, 67.3% of professional service companies reported an increase in their revenue compared to the previous year.
Testimony from an Executive Assisted by XVAL
"We had initiated a sale process even while our company was undergoing judicial recovery. XVAL was able to intervene quickly, confidentially, to produce a detailed, defensible report that was understandable to our partners and the court. Thanks to their expertise, the negotiation proceeded smoothly, and the transaction was finalized under optimal conditions, despite the difficult context. Their ability to simplify technical aspects made all the difference."
This testimony illustrates the importance of human and pedagogical support, beyond the mere technical dimension of the evaluation.
XVAL Support: Tailored and Opposable Expertise
Engaging an independent expert like XVAL ensures the executive:
- A structured, reasoned evaluation report that is usable in all contexts (transaction, litigation, taxation).
- The application of adapted methods, validated by judicial practice and compliant with administrative expectations.
- A neutrality essential for resolving conflicting situations.
- A clear, pedagogical, and personalized presentation, facilitating decision-making.
- Intervention timelines compatible with the urgency of crisis situations (report within 7 days depending on complexity).
Our experts systematically employ sectoral analyses, cross methods (DCF, NAV, comparables), and justify each assumption, enabling the executive and their advisors to defend the retained value before all stakeholders. To learn more about our approach, discover our business valuation solutions in France.
Points of Vigilance and Best Practices for Executives
- Anticipate the evaluation process: do not wait for urgency to initiate the valuation, at the risk of undergoing an unfavorable negotiation or a tax adjustment.
- Document transparently the cash flows, assets, and debts: the reliability of the report relies on access to data, even in a degraded context.
- Choose a recognized expert for their independence and ability to intervene in a contradictory manner, especially in cases of disputes or judicial proceedings (see recommendations from the National Company of Judicial Experts in Finance and Diagnosis).
- Raise awareness among stakeholders (partners, employees, financial partners) about the nature and consequences of a valuation in a distress situation.
For further insights, consult the INSEE report on the transfer of distressed companies and the Bpifrance practical guides on crisis management.
Conclusion: Valuation, a Decisive Lever for Crisis Exit
Valuing a company in distress is much more than an accounting exercise. It represents a major strategic issue that conditions the success of a sale, the preservation of patrimonial interests, and the resolution of conflicts. Engaging an independent firm, recognized for its judicial expertise and pedagogical approach, is a determining asset to secure each step of the process. XVAL, with its experience and unique database of comparables in France, assists executives with unwavering responsiveness and a commitment to quality, in service of the sustainability of companies and the peace of mind of their leaders.