Why Pre-IPO Studies Are Unsound in Concept and in Practice
This article explains why pre–initial public offering (IPO) studies are not a valid basis for determining marketability discounts. They are unsound in concept because the pre-IPO transactions and the subsequent IPO are priced at materially different dates and because the IPO price is not knowable at the earlier date. They are unsound in practice for several reasons, such as selectivity—the data include only companies that subsequently become publicly traded—and the fact that any pre-IPO discount ...
Valuing Shareholder Cash Flows
The integrated theory of business valuation provides a conceptual framework for disciplined analysis of valuation questions. Too often, valuation analysts are tempted to view individual components of a valuation assignment on a piecemeal basis. Adhering to the integrated theory helps valuation analysts develop base valuation conclusions, discounts, and premiums that are rooted in a shared perspective of the subject company and the subject ownership interest. In the first webinar of the three-part series, Chris Mercer ...
Pre-IPO Revival: Up your DLOM Game in 2020
Pre-IPO data are very useful for valuators. Join Brian Pearson, creator of the Valuation Advisors Lack of Marketability Discount Study, to learn how to calculate discounts using different types of data (stock, options, and convertible preferred stock) and learn why the abundance of pre-IPO data is useful versus smaller samples of discount data. Brian will lead a discussion of prior criticisms of some sources of data and address those criticisms as they pertain to Valuation ...
Latest methodology and practices for DLOM examined
A blue-ribbon panel of experts review the primary DLOM methods and reveal new survey data on which methods valuators rely on most.
Cox v. Cox
Court confirms appropriateness of applying a 50% marketability discount to the post-marital value of a steel business but not to its premarital valuation, citing the changes in the steel industry and company-specific factors.
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.
From experts in valuation in each of nine industry groups to a takeoff on Survivor, AICPA BV Conference offers variety
The 2001 AICPA Business Valuation Conference held at the Venetian in Las Vegas December 2-4 was attended by 840 people (by the way, the Venetian served the best conference food that I've ever experienced).
The value of marketability as illustrated in IPOs: May 1997 - December 2000
A critical aspect in determining the fair market value of closely held securities is the discount for lack of marketability. The term discount for lack of marketability is a general term in business v ...
2001 ASA International Appraisal Conference, part 1
The American Society of Appraisers annual multidisciplinary conference was held in Pittsburgh, Pa., July 23-25. The theme of the conference was "Build New Bridges into the Millennium," given that this ...
2000 marketability discounts as reflected in initial public offerings
This interview by Alina Niculita is based on the Valuation Advisors Study of pre-IPO transactions for the year 2000. The complete article describing the study is available on BVLibrary.com ...
Buy-Sell Agreements Fail Lauder II Test and Are Considered Testamentary Devices
This 336-page estate and gift case deals with a $75,935,883 tax deficiency and $30,328,153 in associated penalties asserted by the IRS.
Discounts and premiums must be supported with empirical data
In my April 2001 Editor's Column I discussed the treatment of marketability discounts in court cases, and briefly touched on empirical data to support those discounts. This column is a follow-up and includes an expanded discussion of the empirical studies available not only for marketability discounts, but for control premiums and minority discounts as well.
Estate of True v. Commissioner
1Cases of the following petitioners are consolidated herewith: Jean D. True, docket No. 3408-98 and Estate of H.A. True, Jr., Deceased, H.A. True, III, Personal Representative, docket No. 3409-98. T.C. Memo. 2001-167 UNITED STATES TAX COURT ESTATE OF H.A. TRUE, JR., DECEASED, H.A. TRUE, III, PERSONAL REPRESENTATIVE, AND JEAN D. TRUE, ET AL.1, Petitioners v. COMMISSIONER OF INTERNAL REVENUE, Respondent Docket Nos. 10940-97, 3408-98, Filed July 6, 2001. 3409-98. Buford P. Berry, Emily A. Parker ...
Buy-Sell Agreements Are Testamentary Devices
This 336-page estate and gift case deals with a $75,935,883 tax deficiency and $30,328,153 in associated penalties asserted by the IRS.
Buy-Sell Agreements Do Not Control for Estate Tax Purposes
The Tax Court considered whether buy-sell agreements controlled the value of the business interests the decedent held for estate and gift tax purposes.
Does block size affect DLOM
Has anyone ever published data indicating premiums or discounts for varying ownership percentages? For instance, has anyone produced the following chart for a privately held company?
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.