There have been some rumblings in the business valuation profession about the validity of the traditional ways to estimate a discount for lack of marketability (DLOM). Is it time to consider other methods that are emerging in the profession? According to BVR’s 2023 Benchmarking Guide, more valuers are using additional sources to triangulate their discount estimates and test their conclusions. For example, the use of option price modeling is increasing. A 2023 survey revealed that 30% of respondents are using option modeling—up from 20% in 2018 (it was 7% in 2011).

Easy tool: Currently under development is an online calculator designed to estimate a DLOM based on the analyst’s choice of comparable public companies. The methodology it uses is based on the Margrabe options approach. Dr. Ashok Abbott (West Virgina University) is developing the calculator.

Want to try it out? A link to the calculator is at the end of a very short questionnaire that you can access if you click here. Thanks for your interest!