Drawing Valuation Inferences from Guideline Transaction Data 225
Minority Interest Discounts Inferred from Observed Control Premiums 240
Guideline Transaction Multiples and the Levels of Value 242
Assessing Overall Reasonableness 244
Appendix 7-A: A Historical Perspective on the Control Premium and Minority Interest Discount 247
Part Three Valuing Shareholder Cash Flows
Chapter 8 Restricted Stock Discounts and Pre-IPO Studies 271
Introduction 271
An Overview of Restricted Stock Discounts 275
Review of the FMV/Stout Restricted Stock Database 306
Pre-IPO Discounts 317
Conclusion 325
Chapter 9 Introduction to the QMDM (Quantitative Marketability Discount Model) 327
Introduction 327
Potential Valuation Approaches at the Shareholder Level 328
A Shareholder Level Discounted Cash Flow Model in Outline 331
Economic Factors Giving Rise to the Marketability Discount 338
Conclusion 346
Appendix 9-A: Liquidity and Marketability 349
Chapter 10 The QMDM Assumptions in Detail 359
Introduction 359
Assumption 1: Expected Holding Period for the Investment (HP) 360
Assumption 2A: Expected Dividend Yield (D %) 368
Assumption 2B: Expected Growth of Dividends (GD) 377
Assumption 2C: Timing of Dividend Receipt 378
Assumption 3A: The Expected Growth Rate in Value (GV) 379
Assumption 3B: Adjustments to the Terminal Value 385
Assumption 4: Required Holding Period Return (Rhp) 385
Conclusion 399
Chapter 11 Applying the QMDM 401
Introduction 401
Comprehensive Example of the QMDM in Use 401
Condensed QMDM Examples 414
The Uniform Standards of Professional Appraisal Practice and the QMDM 427
Chapter 12 Applying the Integrated Theory to Tax Pass-Through Entities 435
Introduction 435
The Nature of the S Corporation Benefit 437
The Firmwide Level Value of S Corporations 440
Other Observations Regarding Relative Value at the Firmwide Levels 443
The Shareholder Level Value of S Corporations 446
S Corporations and the Tax Cuts and Jobs Act of 2017 458
Conclusion 467
About the Authors 469
Index 477
A guide that demystifies modern valuation theory and shows how to apply fundamental valuation concepts
The revised and updated third edition of Business Valuation: An Integrated Theory explores the core concepts of the integrated theory of business valuation and adapts the theory to reflect how the market for private business actually works.
In this third edition of their book, the authors—two experts on the topic of business valuation—help readers translate valuation theory into everyday valuation practice. This important updated book:
Includes an extended review of the core concepts of the integrated theory of business valuation and applies the theory on a total capital basis Explains “typical” valuation discounts (marketability and minority interest) and premiums (control premiums) in the context of financial theory, institutional reality and the behavior of market participants Explores evolving valuation perspectives in the context of the integrated theory Written by two experts on valuation theory from Mercer Capital The third edition of Business Valuation is the only book available regarding an integrated theory of business valuation—offering an essential, unprecedented resource for business professionals.
9781119583097
Corporations--Valuation Business enterprises--Valuation