ESOP put option argument for mitigating DLOM is ‘fallacious,’ says new article
“Virtually every ESOP appraisal that has been written in the past 10 years has concluded that, both in the case of purchases of company stock by an ESOP from direct shareholders and in the case of subsequent distributions and repurchases of company stock to and from plan participants, the discount for lack of marketability is [...]
Pre-IPO studies should be at the center of the DLOM debate
BVR’s programming on DLOM issues continues to spur debate about how to support marketability discount conclusions, but with a new restricted stock study on the market (Pluris), and more focus on probability-based models like OPM, poor old pre-IPO studies seems to be getting less attention. They shouldn’t be. For one thing, the IRS itself uses [...]
Is the IRS ‘overcritical’ of data sources in its DLOM Aid? (download it for free at bvresources.com)
Attorney and BV insider Paul Hood provides an executive summary of the IRS Discount for Lack of Marketability Job Aid on his recent blog, The Business Valuation Reviewer’s Handbook. “On the whole, the Job Aid is fairly well done,” Hood says, although it is not without its problems. For instance, “the Job Aid left out several other DLOM [...]
Size premium is getting bigger, GF Data update shows
Data published in GF Data’s Second Quarter 2011 Report reveal unprecedented differentials in the valuations and debt multiples between small and large transactions, according to a recent GF Data press release. The gap “indicates the resurgence of an even more severely bifurcated market that is less accommodating to smaller transactions,” the GF Data sources add. [...]
BizComps and Valuation Advisors DLOM database post major updates
We’ve just added over 400 new private company transactions to BIZCOMPS, bringing the total in the database to over 12,000. BIZCOMPS focuses on small company transactions; the median selling price of the companies added is $166,000. So, it’s a perfect resource for market comparables when your subject company is a “mom and pop” or sole [...]
Minority premium model may not apply to all properties–particularly if the shareholder smokes cigars
In response to last week’s item “’Minority premium’ model may not comply with FMV standard,” James B. Lurie (CapVal-American Business Appraisers, LLC) responded: Depending on the type of property, and assuming that the holder of the 1% interest has an undivided right to use the $2 million property that Mills-Mazer presents as an example, it [...]
Very short holding periods could support substantial DLOM, new study says
In his article “Should Substantial Discounts Apply to Very Short Holding Periods?” (Trusts & Estates, July 2011) Aaron M. Stumpf (Stout Risius Ross) describes his firm’s (SRR) proprietary Restricted Stock Study and how it can reasonably support applying substantial discounts for lack of marketability (DLOM) to investments that lack liquidity over a relatively short holding [...]
‘Minority premium’ model may not comply with FMV standard
The recent BVWire item, “New model says any fractional discount above 30% merits serious consideration and support” inspired Robert Buchanan (PCE Valuations) to write: “‘Minority Premium’? Really?” i in PCE’s newsletter All About Value. “Much of the logic behind the model and the theory are valid in a world where one considers specific buyers,” says [...]
The size premium is alive and well
“There has been some talk in recent years suggesting that the size premium no longer exists,” James Harrington (Duff & Phelps) told the audience at the CalCPA Business Valuation Conference last Friday in San Francisco. “But research that Duff & Phelps has performed (based on data from the Center for Research in Security Prices (CRSP) [...]
Can the IRS subpoena your work papers, even after the taxpayers have paid the deficiency?
An Idaho couple claimed nearly $1.5 million as a charitable contribution deduction on their federal tax returns relating to the granting of a conservation easement. The IRS summoned the taxpayer’s appraiser to provide evidence related to the easement valuation, including all his work files. Based on advice of the taxpayer’s attorney, the appraiser refused the [...]
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