Ownership Interests in Privately Held Companies This article focuses on concepts and issues that are important for family law attorneys to understand when navigating cases that involve divorcing clients with ownership interests in privately-held entities. One of the first questions that arises is whether we need to retain a valuation expert? This is an important question, where experts can provide attorneys ...

A Discount for Controlling Interests This article examines studies and judicial decisions addressing the use of DLOMs where there are controlling, 100% ownership interests, followed by review of a recent client assignment that illustrates the importance of being well versed with the valuation theory in this area. ...

Provides Independent Validation of Indicated Values Newly-minted valuation analysts may question the reasonableness of their conclusion of value. That is natural. In this article, the author introduces readers to the Hypothetical Willing Buyer-Willing Seller Sanity Check Model. This is a model developed by the author in connection with valuation of a 100% controlling interest. ...

Studies in the Closely Held Company Valuation (Part II of II) In the first part of this two-part discussion, the author identified six transaction risk factors attempting to sell a controlling (including 100 percent) interest in a closely held company. Those included: 1) an uncertain time horizon to complete the offering or sale; 2) “Make ready” accounting, legal, and other costs to prepare for and execute ...

Six Transaction Risks Owners Face Selling a Company that May Explain DLOM (Part I of II) In this first of a two-part article, Robert Reilly reviews the various models analysts use to estimate the DLOM and factors analysts consider in the DLOM selection. Valuation analysts often value closely held companies for transaction, taxation, financing, accounting, litigation, and other purposes. Depending on: 1) the ...

Understanding this critical element in a buy-sell agreement Traditionally, business appraisers retained for buy-sell agreements are bound to perform their services within the specific value structure of the contract. When the valuation process is involved in such agreements, it’s essential for estate planners to understand the defining valuation elements involved, particularly the level of value. ...

A Majority ≠ Control or Liquidity Examining actual transactions in the private capital markets and court outcomes figure into whether holding a large block of stock equates with it control or even a premium.  The internal and external factors, legal provisions, and property performance drive this result.  ...

When Valuators Use a Weighted Average Cost of Capital (WACC) to Determine a Discount Rate, the Rate Needs to Be “Iterated.” Here’s Why. When an expert determines a discount rate for a controlling interest in a valuation using the Weighted Average Cost of Capital (WACC), that discount rate needs to be iterated. Since market values of debt and equity in a closely held company are not publicly traded and known ...