Valuation Impact of "Big Beautiful Bill"

On July 4, the President of the United States of America signed into law the "Big Beautiful Bill." BVR wrote a brief note on the probable impact of the Bill on business valuations. BVR's initial assessments are:

• The Bill locks in lower corporate taxes rates (21%) and favorable business deductions (such as 100% expensing of capital investments). These changes will affect the after-tax discounted cash flow models, the weighted average cost of capital inputs (especially the cost of equity), and valuation multiples.

• For healthcare entities that rely on Medicaid reimbursements, the new law cuts Medicaid and other safety net programs. This will probably lower patient volumes and higher uncompensated care for providers including long-term care, hospitals, and assisted living. It will especially impact payers in states that do not make up the difference. The effect to these sectors of the healthcare industry are probably lower revenue forecasts and increased credit risk.

• The new law repeals energy credits and expands fossil fuel permitting. Valuation analysts will need to reassess relative valuations of clean energy verses fossil fuel companies. Companies focused on solar, wind, electronic vehicles, and battery storage may be less viable or see delayed returns on investments. Conversely, fossil fuel companies may benefit from higher valuations.

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