New DLOM survey asks: What approaches are BV appraisers using now, and why?

BVWireIssue #124-3
January 16, 2013

There are currently over 20 different methods for determining the oft-required (and oft-debated) discount for lack of marketability (DLOM). There are benchmark studies, analytical approaches, DCF models, securities-based models, and more. As of last year, there’s also the IRS DLOM Job Aid, which took a comprehensive and sometimes acutely critical look at the most common methods. First made public in 2011, the Job Aid challenged IRS engineers and examiners to “think like a valuator” and start with the baseline presumption that anything above a zero marketability discount requires detailed explanation and support.

Since then the debate over the many DLOM methods has continued, with little consensus among professionals, scant direction from the courts and the IRS, and no current insight on the best, if not most frequent, practices. Consensus might be years (or just a Daubert challenge) away, but in the meantime, we’d like to get a pulse on how BV practitioners and valuation analysts are approaching DLOM in their everyday engagements. To that end, we’ve put together a new online survey, which covers the 20-plus approaches and tries to narrow the most frequently applied. It’s just seven questions and will add to the BV profession’s knowledge base on this critical topic. We will publish the results in coming weeks along with comparisons to our 2009 DLOM survey results; to participate, click here now.

Don’t miss the webinar by the author of the IRS DLOM Job Aid. Did you know that Michael Gregory, former IRS engineering manager and now an independent consultant, was one of the chief authors of the IRS DLOM Job Aid? Get all his insights on working with the IRS and creating credible DLOM determinations in What Business Valuators Need to Know When Preparing a DLOM for the IRS on January 24, Part 4 of our current DLOM series. (For more on that continuing series, see the CPE item in this issue.)

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