• QuickRead Top Story - Valuation/Appraisal

    Understanding the Delta

    March 4, 2026

    When 409A Valuations Differ from Funding Rounds In early‑stage and growth‑stage companies, it is common, and often surprising to founders, when the per‑share price established in an IRC §409A valuation does not match the price investors paid in a recent financing round. This difference can feel counterintuitive, especially when the company has just completed a successful raise and the preferred share price reflects strong investor interest. This article discusses why funding round and valuations differ. In early‑stage and growth‑stage companies, it is common, and often surprising to founders, when the per‑share price established in an IRC §409A valuation does not…

  • QuickRead Top Story - Valuation/Appraisal

    Common Pitfalls to Avoid in a 409A Valuation

    June 8, 2022

    How to Avoid Them! A 409A valuation refers to a method of determining the value of a company’s common stock. In other words, the 409A valuation is a method of calculating fair market value (FMV) according to the regulations under the Internal Revenue Code (IRC). This valuation can be carried out using various types of valuation methodologies, however, it is important to avoid pitfalls in 409A valuation when carrying out the valuation to obtain a more accurate result. In this article, we will discuss some of the most common mistakes that can be made when carrying out a 409A valuation,…

  • QuickRead Top Story - Valuation/Appraisal

    The Most Underutilized Tool in Business Valuation

    June 12, 2019

    The Use of Common Sense and Experience The acceptance of tools such as Monte Carlo simulation and Option Pricing models has changed our ability to value options, warrants, and derivative instruments. The list goes on and on. However, as many of us are fond of saying, valuation is as much an art as it is a science. Many of our tools address the science, not so many of them address the art. In my opinion, one of the most underutilized tools that addresses the art side, may in fact be our own common sense. “Common sense is not so common.”-Voltaire…

  • QuickRead Featured - Valuation/Appraisal

    Using the Option Pricing Method Changes the Standard of Value

    June 21, 2017

    Does the IRS or Anyone Care? (Part II of II) Part one of this article presented the “current method” and “option pricing method” (OPM) for allocating value to common stock for 409a valuations, and how these two methods differ in pricing of common stock. Part two examines the implied changes made by OPM and how it affects stakeholders. The article begins with a brief review of the key impacts on the valuation problem.

  • QuickRead Featured - Valuation/Appraisal

    Using the Option Pricing Method Changes the Standard of Value

    June 14, 2017

    Does the IRS or Anyone Care? (Part I of II) In part one of this two-part article, the author presents the two methods for allocating value to common stock for 409a valuations, and then show how they affect the pricing of common stock. By way of background, to meet FMV, the standard of value requires measuring value under the representation of a hypothetical willing buyer and a hypothetical willing seller, both with equal knowledge of the facts, that engage in an arm’s-length transfer. Yet, the Option Pricing Method (OPM) used to price common stock is based on a model of…

  • QuickPress - Valuation/Appraisal

    The IRS Equity Compensation Audit Guide

    November 18, 2015

    Obviously, every equity compensation plan is different and the particular tax treatment of a given security depends on the facts and circumstances of the arrangement.  Samantha L. Albert, senior financial analyst with Mercer Capital, examines equity-based compensation and the tools available when examining these arrangements. To read more about the results of this report in the Mercer Capital’s Financial Reporting Blog, click: The IRS Equity Compensation Audit Guide. This article is republished from Mercer Capital’s Financial Reporting Blog.  It is reprinted with permission.  To subscribe to the blog, visit: http://mercercapital.com/category/financialreportingblog/.

  • QuickPress

    A Few Thoughts on Valuing Investments in Startups: An Interview with Travis Harms

    November 11, 2015

    The need to develop reliable, defensible fair value markets for hard-to-value assets is universal.  Sujan Rajbhandary, senior member of Mercer Capital’s Financial Reporting Valuation Group, sits down with Travis Harms to get his insight from a financial reporting perspective on a few issues around valuations of startups. To read more about the results of this report in the Mercer Capital’s Financial Reporting Blog, click: A Few Thoughts on Valuing Investments in Startups: An Interview with Travis Harms. This article is republished from Mercer Capital’s Financial Reporting Blog.  It is reprinted with permission.  To subscribe to the blog, visit: http://mercercapital.com/category/financialreportingblog/.

  • Mergers and Acquisitions/Exit Planning - QuickRead Featured - Valuation/Appraisal

    Treatment of Selling/Employee Shareholder

    September 16, 2015

    Transition Period Payments After a Business Acquisition Owner’s of closely held businesses will usually be required to remain active in the business after the same is sold. This article examines two key questions related to such post-transaction transition payments: (1) how much should the buyer pay to the sellers for these transition period services, and (2) how should these transition period payments be structured?

  • QuickRead Featured - Valuation/Appraisal

    50 Reasons for a Business Appraisal

    May 13, 2015

    Creating Value for Business Owners and Board Members In this article, Edward Mendlowitz, CPA, ABA, CFF. shares his views regarding the importance of having a business valued. He identifies 50 ways that a valuation professional can provide something far more valuable than a number. While the valuation profession is under pressure to reduce costs or prepare a report, the business owner is better served in the long run retaining a valuation professional that provides greater insight to operations.

  • QuickRead Featured - Valuation/Appraisal

    409A Options Valuations: Who Pays the Price and What We Can Do

    September 12, 2012

    UConnect v. Facebook Showed How 409A Valuations Can Destroy Value. Here’s What Shareholders and VCs Need to Know—and Some Ideas About How to Better the Situation. Lorenzo Carver previously explained how 409A valuations destroy value for shareholders receiving grants, and provided a case study of how this all played out in UConnect v. Facebook. In this final article in a three-part series, Carver presents us with thoughts on who pays the price when a valuation is overvalued, what some of the causes of today’s status quo are and some specific suggestions on practices our industry might adopt to fix the…

  • QuickRead Featured - Valuation/Appraisal

    Part II: Dual-Purpose 409A Valuations: Here’s Why and How They Overvalue Stock Options

    September 5, 2012

    The Winklevoss Twins Realized Too Late the Value They’d Agreed to for Their Common Shares of Facebook. Here’s How it Played Out. Last week Lorenzo Carver introduced the topic of how 409A valuations destroy value for some shareholders.  Today’s piece is a case study in how a wide disparity in value estimates largely created by the 409A process played out in the UConnect v. Facebook lawsuit.

  • QuickRead Featured - Valuation/Appraisal

    Dual-Purpose 409A Valuations: Here’s Why and How They Overvalue Stock Options

    August 30, 2012

    Why Built-up Volatility Rates Produce Better Value Indications In part one of a three-part series, Lorenzo Carver explains how the interaction between auditors and valuation professionals during dual-purpose 409A valuations of common stock and employee stock options destroys value for hundreds of thousands of employees receiving stock options every year by granting options at strike prices that are above the fair market value of the underlying common stock.