The latest Society of Shares and Business Valuers (SSBV) session focused on current minority interest discounts for UK valuers and was led by Sandra Mossios, now a partner at EY. This session was not recorded in order to ensure an open discussion, but Mossios offered an overall view of discounts in the UK as the featured speaker.

Inflation, IFRS 16 (Leasing), FOREX, geopolitical exposures for your subject companies, staff shortages, and “so many other complex factors have contributed to market data and forecast variations,” she says. These also influence minority interest discounts.

She said these changes require all valuers to improve their analyses, making them “robust and supportable, scrutinising models and sources of data.” The UK continues to allow discounts depending on the facts of the case, and there are longstanding legal precedents, including the general rules that “personal relationship involving mutual confidence” of quasi-partnerships might not be eligible.

Mossios referred SSBV members to other sources available to support DLOC and DLOM conclusions in the UK (besides restricted stock and other US or international resources), including:

• ACCA’s Technical Fact Sheet, which argues that “even for small uninfluential minority interest a discount of no more than, say 33% may be appropriate”; and
• HMRC SAV Manual (now available in the Practical Share Valuation book by Eastaway et al.), which offers guidelines for discounts up to 70% for less than 10% positions, depending on the facts in the case.

High leverage, low revenues, volatility, and low asset base tend to lead to higher discounts—but Mossios noted that the benchmarking is difficult. She noted that even US expert Chris Mercer has been questioning the traditional “Mandelbaum factors” in his business valuation blog recently.

Larger blocks (above 20%) of bigger companies may be very difficult to sell due to both marketability and illiquidity, so those often generate high discounts as well. Still, “relying on blanket averages is no longer supportable,” Mossios commented.

SSBV’s next session is 19 October with David Bowes. A registration link is included in the listing below.