Business Valuation Update

In the February 2023 issue:
  • Economic Outlook for the Month
  • MVIC/EBITDA Trends
  • A look at the FactSet Mergerstat/BVR Control Premium Study
  • The February 2023 Cost of Capital Center
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The Business Valuation Update (BVU) has been the voice of the valuation profession since its inception in 1995. Each monthly issue includes new thinking from leading professionals, detailed reports from valuation conferences, analysis of new business valuation approaches, coverage of “landmark” legal cases in key business valuation issues, regulatory and standards updates, and much more!  Learn more and subscribe >>
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Lack of marketability discounts suffer more controversial attacks

The apparently well-meaning Drs. John Kania and Mukesh Bajaj are at it again, espousing discounts for lack of marketability for stocks of closely held companies that are a fraction of those encountered in the real world.

Critique of attacks on private placement and pre-IPO studies for determining marketability discounts

Two recent articles by John J. Kania, Ph.D., in Business Valuation Review 1 , regarding discounts for lack of marketability contain questionable facts and methodology, and could lead readers ...

Marketability discounts frequently a big money appraisal controversy

The applicability and/or magnitude of discounts for lack of marketability often are a large, if not the largest, money issue in a disputed business valuation. Lawyers should know enough about marketability discounts to make at least a preliminary judgment about their own and the opposing expert's justification as to the applicability or lack if it, and if applicable, justification as to the magnitude.

Discounts for Lack of Marketability: Answering Your Latest Questions

BVResources’ recent telephone conference on discounts for lack of marketability (DLOM) inspired several questions that the panelists couldn’t get to during the allotted time.

Marketability discounts: new empirical evidence and questionable attack

Two recent studies now on BVU Online Management Planning recently released a study on restricted stock transactions from 1980-1995,1and Robert W. Baird & Co. just completed the eighth instal ...

DLOMs in Fair Value Cases: Lack of Marketability Does Not Cause Private Company Discounts

Are private companies worth less than public companies solely because they are not publicly traded or because of other identifiable factors (some of which would apply to various public companies as well)? A school of thought consisting of experienced and thoughtful experts believes they are. U.S. valuers Shannon Pratt and Roger Grabowski set forth this view ...

“Levels of value” chart to be updated to reflect difference in restricted stock versus private stock

The gap in discounts for lack of marketability for closely held stocks versus the discount for lack of marketability for restricted stocks of public companies has widened significantly in th ...

Discount & premiums is the subject of new working paper series

It seems fitting to announce, in this same issue with John Emory's excellent new research on marketability discounts, that I have started a new writing project on discounts and premiums. My plan is to ...

IRS Notice alleges lower discounts apply to closely held stock

At least some IRS employees have interpreted the lower discounts in recent restricted stock studies as evidence that discounts for lack of marketability for closely held stocks should be low ...

Confusion Over Key Valuation Issues Prompts Remand

In shareholder dispute, appeals court says trial court did not follow controlling shareholder agreement requiring appraiser to value the company as an entity; also, appraiser’s report left it unclear whether valuation included improper minority discount.

New Jersey Court Finds Defendant’s Actions Justify DLOM in Forced Buyout

In New Jersey fair value determination, following precedent, court finds defendant’s conduct justifies use of a marketability discount because he was oppressing shareholder who created “extraordinary circumstances” necessitating forced buyout; court rejec ...

Empirical evidence shows holding period of major determinant of marketability discount

An incorrect and misleading assertion was contained in the article "Predicting Lack of Marketability Discounts by Use of an Econometric (Statistical Regression) Model" by Dr. John Kania , a ...

Control interest marketability discounts

In your text, " Valuing a Business ", third edition, you state that the time horizon is a factor that contributes to a marketability discount for controlling interests. You then go ...

Quantifying marketability discounts

I am in the process of completing my demonstration reports for my CBA. I used a 30% LOM discount after deriving a value for a closely held, small business using the Ibbotson build up method.

Marketability discounts in divorce cases

I am a subscriber to several Shannon Pratt publications and hoping you could either answer my question by e-mail or pass it on to someone else for me. I am reviewing a divorce valuation r ...

Marketability discounts are real

Rand M. Curtiss in his article, "A Practical Methodology for Determining Premiums and Discounts," December, 1997, Business Valuation Review , stated what many others have opined ...

Valuer’s Q&A Corner

This column is your opportunity to get answers on your most pressing business valuation questions with tips and advice from BV thought leaders. Please email your questions to and look for responses in each issue of BVA. In this issue, Richard Stewart (partner at PricewaterhouseCoopers) offers his advice on using IPO studies and restricted stock studies for discounts.

Valuer’s Q&A Corner— Richard Stewart

Q: How does the choice of standard of value affect discounts and premiums?

Why Valuation Experts Should Not Use the Term ‘Nonmarketable’

For the past two years, our firm has not used the term “nonmarketable” as a descriptive for a conclusion of value. We feel it is completely inappropriate to use a negative term when informing clients of the value of their controlling or minority interest. Rather, we use more positive terms that are part of a new paradigm of describing levels of value.

BVA Profile: An Expatriate’s Perspective on Australian BV

BVA recently spoke with John-Henry Eversgerd, a valuation specialist in Australia with over 20 years of valuation and financial analysis experience. In the interview, Eversgerd, who is from the United States but has worked and lived in Australia since 2008, talks about the valuation industry here and makes comparisons to the larger valuation scene in America. He is one of the founders of the BVA and has launched and led a valuation practice at an Australian boutique advisory firm. He is also an Accredited Senior Appraiser—Business Valuation of the American Society of Appraisers, a Chartered Financial Analyst charter holder, and holds a Masters of Business Administration from the University of Michigan Ross School of Business.

Editor believes Tax Court erred in McCord case illiquidity discount

In the case of McCord v. Commissioner, I believe that the Tax Court erred in both its methodology and its final conclusion regarding the discount for lack of marketability.

The oxymoron of "control, marketable"

When we use the terms "marketable" or "nonmarketable" in business appraisal, we typically are referring to minority interests. Yet, some people apply the expression "marketable" or "nonmarketable" to controlling interests, where the distinction seems meaningless.

BVU legal and court case editor presents update

The Institute of Business Appraisers has invited our own legal and court case editor, Linda L. Kruschke, to present the Court Case Update segment at its National Conference in Orlando in early May. I ...

Partnership discounts from NAV lower in 1997

Courts and other reviewers of business appraisals are becoming increasingly demanding about getting specific market-comparable data, as opposed to just generalities or broad averages. To this end, t ...

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