The use of Monte Carlo to analyze how uncertainties influence value conclusions has been a big topic at all of the major business valuation conferences this season. So we decided to survey business appraisers to see how many are using this technique and, if so, in what circumstances.
More than half use it. We received a relatively small number of responses (110), suggesting that the method is still on the fringes for the BV community. The majority of our respondents (58%) have used Monte Carlo analysis in a valuation report but do so “as required by circumstances.” A growing 15% use it in nearly every valuation, and the remainder (32%) use it “infrequently.”
The most common applications of this method are for fair value financial reporting and the valuation of complex securities. Valuations of early-stage entities is another common application. Interestingly, over a quarter of those who use the method now use it in valuations having to do with business disputes.
Our thanks to those of you who responded to the survey, and we will send you a copy of the full results. Stay tuned for our next survey!
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