Using the market approach to value a business in the time of crisis

Lately, when valuing private businesses in these times of crisis, I'm often faced with an interesting dilemma. Is the use of the market approach in these times reasonable at all?

1. Finding truly comparable publicly quoted companies is difficult these days. Many companies have internal issues that can seriously affect their value, such as financing issues, liquidity issues, focus on the market segment which is in steep decline, "wrong" customers (e.g. in automotive parts industry, where most companies are doing badly and some prosper),... Additionally, the company we value may have such problems itself. Perhaps the industry sales have on average dropped by 20%, while the company we are valuing experienced a 40% drop in sales. Market approach may work just fine (on average) in a stable or growing market, but in such an unstable environment it does not allow you to take into account some very specific factors that are very much present at this point in time. On the other hand, DCF method allows you to do just that.

2. Using comparable transactions (for valuing majority positions) from the past, when there was a different climate in the market, is also debatable. In the past prices have been driven up by the presence of many investors on the market. We had strategic investors in a buying mode and financial investors with heavy wallets, ready to compete with strategic investors on almost any transaction. Financing was also (more or less freely) available. Today, the situation has changed. Potential investors with financing in place are a rare bread nowadays, so it's a buyer's market. Using high multiples from a recent past does not make much sense now. 

So, where is the problem? Owners of companies are still under the impression of days gone by. Up till about a year ago they had offers on the table for certain amounts that may not be achieved today. So, when they see your valuation, they start waving those offers and asking you whether you've lost your mind. In most cases it's possible to explain that we're in a different environment now - they don't like it, may even disagree ("for us it's different"), but accept your arguments. But in some cases they disagree up to the point you start doubting your decisions. So you recheck your assumptions. And I have to admit that in certain industries transaction multiples just might remain high (e.g. media, energy), since transactions are driven not only by pure economic motives, but also by some "higher", "strategic" motives. But such industries are rare and investors on average rational (even more so in the light of this crisis).

So, as a matter of principle I am sceptical of using past transactions' data in this time of crisis, but I do a thorough analysis in each case to see whether it might make sense to rethink this position.