In our recent online survey regarding the IRS DLOM Job Aid, we asked participants what methods they were currently using to determine marketability discounts. This question more or less paralleled one in our 2009 survey on marketability discounts, in which (predictably) the vast majority—over 90%--of respondents replied that they relied on the restricted stock studies. In this latest poll, however, that number dipped to less than three-quarters (71.4%). Interestingly, the percentage of respondents who reported relying on a DCF model such as the QMDM nearly doubled, from 16.7% in 2009 to 33.3% in this current tally. Use of pre-IPO studies stayed flat, at just about 50%, while options added in the most recent survey indicate that only 9.5% of respondents currently use the Liquistat (Pluris) database, but two-thirds (66.7%) use a Mandelbaum-type analysis.
None of the results is scientific, of course, but the comments to the current survey do reveal a clear caution against just “quoting studies and picking a discount from a group because it seemed reasonable,” as one respondent said, adding that the IRS Job Aid “certainly shows you are expected to include specific analysis rather than ‘talk around’ a bunch of studies.”
Similarly, one respondent professed astonishment “that so much time is spent on ‘studies’ of companies that in the best case have little to do with the subject company.” The ultimate question: “What would someone who is actually thinking about buying a little company do to evaluate it as either a majority or minority interest holder?” To that end, several respondents said they use the company-specific analysis afforded by FMV Opinions, which mirrors the responses to the ’09 survey.
Last chance to get the latest analysis: tune into today to BVR’s special 100-minute webinar, FMV Responds to the IRS DLOM Job Aid, featuring Lance Hall (FMV Opinions).
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