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Business Valuation Discounts and Premiums

Business Valuation Discounts and Premiums

Author: Shannon P. Pratt
Publisher: John Wiley & Sons
ISBN: 9780471394488
Published In: October 2001
Format: Hardback , 432 pages
Jurisdiction: International or US ? Disclaimer:
Countri(es) stated herein are used as reference only

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Business Valuation Discounts and Premiums

There is often more money in dispute in determining the discounts and premiums in a business valuation than in arriving at the pre-discount valuation itself. Discounts and premiums affect not only the value of the company but also play a crucial role in determining the risk involved, control issues, marketability, contingent liability, and a host of other factors that can make or break a deal. It is essential that every appraiser know when discounts and premiums apply and how to quantify them.

Shannon Pratt's Business Valuation Discounts and Premiums compiles all the key information you need to successfully and accurately determine discounts and premiums in business valuations. It explores the three areas of discounts and premiums-income valuation, market valuation, and the asset approach-explaining how different discounts or premiums may be applicable, depending on the basic valuation approach used, and how each approach can affect the outcome.

Filled with many never-before-published studies, the comprehensive coverage includes:
* Strategic acquisitions
* Extensive empirical data
* Pre-IPO marketability discount studies
* Merger and acquisition negotiations, empirical evidence from completed transactions, and positions taken by courts in litigation

Reviews

"This book contains chapters on other discounts the up until now we have only seen brief discussions on in the literature: Voting versus non-voting stock; key person discounts; discounts for trapped-in capital gains taxes; blockage discounts; non-homogenous assets (portfolio) discounts; and discounts for the environmental, litigation and other contingent liabilities. The final chapter entitled "Common Errors in Applying Discounts and Premiums" is a must for all of us when we perform a final review on our analysis and reports." --Linda B. Trugman (National Litigation Consultants Review, Dec 01)

List of Exhibits.

Foreword.

Preface.

Acknowledgments.

1. Overview of Business Valuation Discounts and Premiums and the Bases to Which They Are Applied.

2. Minority Discounts and Control Premiums.

3. Empirical Data Regarding Minority Discounts and Control Premiums.

4. Minority Discounts and Control Premiums in the Courts.

5. Discounts for Lack of Marketability for Minority Interests: Concept and Evidence.

6. Synopsis of Restricted Stock Studies.

7. John Emory Pre-Initial Public Offering Discount for Lack of Marketability Studies-Complete Underlying Data.

8. Factors Affecting Discounts for Lack of Marketability for Minority Interests.

9. Discounts for Lack of Marketability for Controlling Interests.

10. Quantitative Marketability Discount Model.

11. Marketability Discounts in the Courts.

12. Voting versus Nonvoting Stock.

13. Key Person Discounts.

14. Discounts for Trapped-In Capital Gains Taxes.

15. Blockage Discounts.

16. Nonhomogeneous Assets ("Portfolio") Discounts.

17. Discounts for Environmental, Litigation, and Other Contingent Liabilities.

18. Discount Adjustments for Limited Partnership Interests and Other Asset Management Entities.

19. Premium and Discount Issues in Undivided Interest Valuations.

20. Common Errors in Applying Discounts and Premiums.

Appendix A: Bibliography.

Appendix B: Data Resources.

Appendix C: Table of Cases.

Appendix D: How Much Can Marketability Affect Security Values?

Appendix E: Internal Revenue Service Revenue Ruling 77-287.

Appendix F: Securities and Exchange Commission Rules 144 and 144A.

CPE Self-Study Examination.

Index.

SHANNON P. PRATT is a founder and Managing Director of Willamette Management Associates, one of the oldest and largest independent valuation consulting, economic analysis, and financial advisory services firms, with offices in cities across the United States.