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5 Simple Sense-Checks That Vastly Improve Your Business Valuation

Valutico

5 Simple Sense-Checks That Vastly Improve Your Business Valuation (According to the Experts). It’s easy to get tripped up by detailed assumptions when valuing a business, especially if you’re in a hurry to produce results. One critical component of the terminal value is the perpetual growth rate. inflation).

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The 2023 AICPA Business Valuation Conference and One Thought on Valuation Adjustments

Chris Mercer

Atticus Frank will present tomorrow and talk about why market multiples differ between and among industries. Yours truly will present on a panel addressing some hot valuation issues. Travis Harms and I cover the topic of normalizing adjustments in our book, Business Valuation: An Integrated Theory Third Edition , on pages 117-123.

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Mercer’s Musings #3: Marketability Discounts Re Two Hypothetical Minority Interests

Chris Mercer

My conclusion is that the various restricted stock studies are inadequate to meet current business valuation standards and that they should not be used as a basis for “guessing” the magnitude of marketability discounts for illiquid interests of closely held businesses. ”: II.

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Mercer’s Musings #5: Pre-IPO Studies/Discounts and Marketability Discounts

Chris Mercer

Introduction and Conclusion My musings on the use of restricted stock discounts to estimate marketability discounts (or DLOMs) have led me to the conclusion: Restricted stock studies/discounts cannot be used to estimate DLOMs in any credible, standards-compliant manner. Three of the first four Mercer’s Musings posts address this issue.

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Fair Market Value and the Nonexistent Marketability Discount for Controlling Interests

Chris Mercer

This post provides a discussion of several implications of the definition of the standard of value known as fair market value. We focus first on the definition of fair market value. We then look at the implications for the so-called “marketability discount for controlling interests.”

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Deja Vu #10: Valuation Theory is the Same for Businesses and Business Interests: V =f(CF, G, and R)

Chris Mercer

While a growing number of appraisers use a discounted cash flow model to value illiquid minority interests of businesses ( 22% according to a recent Business Valuation Resources Survey ), the majority of appraisers continue to rely on restricted stock studies and pre-IPO studies in their marketability discount determinations.

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Mercer’s Musings #4: Factors to Consider in Valuing Partial Ownership Interests

Chris Mercer

The second and third musings address the issue of marketability discounts and conclude that it is not possible to comply with any valuation standards, whether USPAP or not, using only averages of restricted stock studies as a basis for “guessing” marketability discounts. The relevant pool of potential buyers, if any.