Fair Value/Fair Market Value

- The estimated price at which an asset would trade between willing parties in an open market, often used in financial reporting and valuation.

Scenario:

A private equity fund must report the fair value of its portfolio companies to LPs each quarter, using market comps and discounted cash flow analysis.

Why This Matters:

Ensures transparency, regulatory compliance, impacts performance metrics, supports exits and secondary sales.

The Process:

Valuation teams document methodologies, assumptions, and reconcile with third-party appraisals as needed.