Business appraisers “can expect to see a lot of new ideas and concepts, models that are no longer used, and models that haven’t been used but are popping back up,” Jim Hitchner (Financial Valuation Advisors) told attendees at the AAML/AICPA conference in Las Vegas. One area in which appraisers continue to look for the best standards of practice is DLOMs. Hitchner stressed the need to understand the strengths and weaknesses of the following studies prior to valuing any minority interest: 

• Trugman Valuation Associates’ Restricted Stock Study
• FMV Opinion’s Detailed Restricted Stock Study
• Valuation Advisors’ Detailed Pre-IPO Database
• Longstaff’s “Look Back” Put Option Model
• Seaman’s Long-Term Equity Anticipation Securities (LEAPS) Method
• Hall’s Chicago Board Opinions Exchange’s Volatility Index (VIX) Comparisons for DLOMs in a Distressed Economy
• Mercer’s Quantitative Marketability Discount
• Finnerty’s Asian Arithmetic Average Strike Put Option Model
• Ashok Abbott’s Liquidity Factor and Data

Indeed. “The discount for lack of marketability is the most important discount in valuation,” said U.S. Tax Court Judge Laro at the second annual DLOM Summit last year (BVU; Nov. 2009).  For more discussion on DLOMs, consult BVR’s Guide to Discounts for Lack of Marketability here.