Title: Analysis and Valuation of Privately Held Companies
Abstract: This chapter focuses on the challenges of valuing private or closely held businesses. Following a brief discussion of such businesses, the chapter discusses in detail the hazards of dealing with both limited and often unreliable data associated with privately held firms. The chapter then focuses on how to properly adjust questionable data as well as how to select the appropriate valuation methodology and discount or capitalization rate. The chapter goes deep while discussing how to apply control premiums, minority discounts, and liquidity discounts in valuing businesses. The collapse of the credit markets for collateralized debt obligations in 2008 and 2009 underscores the importance of properly pricing assets to reflect potential market illiquidity. The chapter also includes a discussion of how corporate shells, created through reverse mergers, and leveraged ESOPs are used to acquire privately owned companies and how PIPE financing may be used to fund their ongoing operations.
Publication Year: 2010
Publication Date: 2010-01-01
Language: en
Type: book-chapter
Indexed In: ['crossref']
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