When valuing a business, it’s important to clearly identify the appropriate premise of value. There are two basic options: going concern value or liquidation value. In general, liquidation value sets the floor for a company’s value. When a company is “worth more dead than alive” — such as in a Chapter 7 bankruptcy filing — liquidation…
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How Business Valuators Estimate the DLOM in a Volatile Market
When valuing a business, recent market volatility may well translate into higher discounts for lack of marketability (DLOM) because investors generally will pay less for illiquid, risky investments. However, there’s a silver lining to economic uncertainty: It provides an opportunity for wealthy individuals to gift private business interests at significant discounts, potentially saving a substantial amount…
Looking to the Future when Valuing a Business
Historical financial results are only relevant in a valuation to the extent that the business expects to achieve similar results in the coming years. When projecting future economic benefits, it’s important to consider expected changes to a subject company’s internal and external conditions. Challenging the Status Quo The last three to five years of financial statements…