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Estimating a COVID-19 Marketability Discount for Small Businesses

A framework of thinking for developing a marketability discount for a majority interest on a small business in the wake of the pandemic.

Analyst develops a COVID-19 marketability discount

Valuation analysts have several ways to reflect the extra risk of COVID-19 on businesses, such as adjusting the cash forecast and tweaking the company-specific risk premium (CSRP).

Latest Study Available for the Empirical Method for Determining DLOM

The 2020 Discount for Lack of Marketability (DLOM) Study, recently released by Partnership Profiles, offers objective rate of return measures to implement the Johnson/Park empirical method. This method uses three approaches to measure the increase in return required to compensate investors for the lack of marketability of a subject interest.

New version of ‘Stout Restricted Stock Study Companion Guide’ now available

The most widely used restricted stock transaction database for providing empirical support for a discount for lack of marketability (DLOM) is the Stout Restricted Stock Study (formerly FMV Opinions).

How much less is a minority share worth now?

HMRC changes have increased the difficulty of providing support for rates of return for illiquid and difficult-to-market minority shares.

2020 Johnson/Park DLOM study is now available

The Johnson/Park empirical method to estimate a discount for lack of marketability (DLOM) is the third most popular method business appraisers use for this purpose, according to a BVR survey.

Indiana and South Carolina courts issue key discount rulings

The Indiana Court of Appeals and the South Carolina Supreme Court recently issued noteworthy rulings on the appropriateness of discounts in valuing minority interests. The contexts in which the issue arose were different, but both situations amounted to a compelled buyback of shares.

2020 Discount for Lack of Marketability Study

July 2020 PDF

Bruce A. Johnson, James R. Park

Partnership Profiles, Inc.

The 2020 Discount for Lack of Marketability Study provides objective rate of return measures to implement the Johnson/Park Empirical Method for determining a discount for lack of marketability (DLOM) for the valuation of interests in privately held corporations and partnerships. Learn more >>

Mercer using a 1% COVID-19 risk premium—for now

Veteran business valuer Chris Mercer (Mercer Capital) was a keynote speaker at the New York State Society of CPAs Business Valuation/Litigation Services Conference, which was held online on May 18.

Market Volatility and Its Impact on the Valuation Advisors Pre-IPO Database

The recent stock market volatility has ripple effects on pre-IPO studies, which are used to estimate a discount for lack of marketability (DLOM).

SRO Crowd Sees Latest Update to Leading Pre-IPO Study

The largest audience for a BVR webinar in recent memory watched as Brian Pearson put the Valuation Advisors Lack of Marketability Discount Study through its paces. Pearson, the creator of the study, discussed new data added in 2019, misconceptions and criticisms of pre-IPO data, and uses for the data that extend beyond estimating a DLOM.

Introducing the Rudich/Jaroudi BIZCOMPS DLOM Study

The authors do an analysis of the BIZOMPS database of sales of small private companies to uncover an imbedded discount for lack of marketability (DLOM) in a specific industry. The authors would like feedback on this study and methodology.

Pre-IPO Studies Endure to Retain Foothold in the DLOM Toolbox

Pre-IPO studies have withstood criticisms and court challenges to remain a viable method for developing a discount for lack of marketability (DLOM). Over a third (38%) of valuation experts use them, according to a survey. The article includes an interview with Brian Pearson of Valuation Advisors, a provider of the largest pre-IPO study.

New study gleans DLOMs from the BIZCOMPS database

Imbedded discounts for lack of marketability (DLOMs) have been uncovered in a new study of the BIZCOMPS database of sales of small private companies.

DLOM support: the more the better

Two main approaches for estimating a discount for lack of marketability (DLOM) are restricted stock studies and pre-IPO studies.

Criticisms of pre-IPO data addressed in free webinar today

A valuation expert recently told us that, in an engagement he just completed, he did not use any of the pre-IPO studies in developing a discount for lack of marketability (DLOM).

Little-known feature of the VA pre-IPO study

Did you know that the Valuation Advisors Lack of Marketability Pre-IPO Discount Study also contains convertible preferred stock (CPS) transactions?

BV data: Sometimes it just ‘is what it is’

Empirical data are the backbone of defensible business valuations, but there are strengths and weaknesses with all data.

Business Valuation Update Yearbook, 2020 Edition

January 2020 Hardcover, PDF

BVR (editor)

Business Valuation Resources, LLC

BVR has you covered with the Business Valuation Update Yearbook 2020. This newest edition from the publishers of Business Valuation Update covers the year’s most groundbreaking and thought-provoking advancements in business valuation, and more. This critical desktop reference keeps you ahead of your peers with on-the-ground reporting from valuation experts, thought-leaders, and BVR’s editorial team. Learn more >>

Do You Really Know Your Data for Determining Discounts?

The analysis of a popular data source used in determining discounts for asset-holding entities. An advanced understanding of the data is critical in order to avoid overvaluing your client’s investments by understating the discounts.

Dig deeper into restricted stock studies for DLOM

A common approach to developing a discount for lack of marketability (DLOM) when using restricted stock studies is to simply list their averages and use those figures in the estimate.

Vianello offers free e-book on empirical research regarding DLOM

“When I entered the valuation field, I quickly became very dissatisfied with the available means of estimating DLOM,” writes Marc Vianello (Vianello Forensic Consulting LLC).

BVR now offers the Johnson/Park DLOM studies

To estimate a discount for lack of marketability (DLOM), business appraisers typically look at the restricted stock studies and the IPO studies.

2018 Discount for Lack of Marketability Study

July 2018 PDF

Bruce A. Johnson, James R. Park

Partnership Profiles, Inc.

The 2018 Discount for Lack of Marketability Study provides objective rate of return measures to implement the Johnson/Park Empirical Method for determining a discount for lack of marketability (DLOM) for the valuation of interests in privately held corporations and partnerships.  Learn more >>

2017 Discount for Lack of Marketability Study

July 2017 PDF

Bruce A. Johnson, James R. Park

Partnership Profiles, Inc.

This study provides objective rate of return measures for implementing the Johnson/Park Empirical Method for determining a discount for lack of marketability for the valuation of interests in privately held corporations and partnerships.  Learn more >>
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