The horsemeat scandal will no doubt continue to unfold over the coming months, but for some of the affected companies, the harm done to their reputations may well prove fatal. The impact on business values will take many forms. For some it may be a short term loss of revenues that they can ride out. Others already facing financial stress as a result of the tough economic environment, will be brought down by this crisis. It is more likely, however, that the consequences could be much more long term.
The loss of a major contract will move company valuations significantly. Costs and margins will change as companies invest in the systems and procedures needed to assure the integrity of their supply chain. The sector could be faced by a double squeeze on valuations with both a reduction in profits and an increase in risk leading to investors demanding a higher rate of return.
