Description

How can appraisers determine the appropriate marketability discount for each valuation situation? This is a critical question since the discount for lack of marketability is the single largest valuation adjustment factor in most minority interest appraisals. The marketability discount is normally expressed as a percentage to reflect the difference between two prices, the freely marketable price, which for closely held businesses is a hypothetical construct since by definition there is no market for their shares, and a nonmarketable price.

Learning Objectives:

• What gives rise to a marketability discount, or the discount for lack of marketability, or DLOM?
• How do we determine the DLOM, given the central objective of arriving at credible nonmarketable minority values?
• What methods are used to quantify DLOM? How do the methods rank in terms of valuation theory?

Speaker(s):

• Z. C. Mercer, FASA, CFA, ABAR, Chief Executive Officer, Mercer Capital