Vol. 16, Issue No.

1
JANUARY 2015

Quantifying the Private Company Discount:

Multiples Approach and Acquisition Approach
By Kevin M. Zanni, ASA, CBA, CVA, CFE commonly discussed within the valuation profession, PCD
studies may provide a more transparent means for estimating
Introduction the DLOM faced by investors in private companies. These
Private company valuation is typically performed by BV studies suggest that private companies typically sell at lower
professionals who regularly estimate the value of nonmar- transaction pricing multiples than similar public companies.
ketable interests. In order to develop a valuation estimate, Several authors suggest possible reasons as to why private
BV professionals review and interpret empirical evidence to companies sell at lower transaction multiples; however, some
support decision making. For example, for the valuation of authors attribute the reason to the lack of liquidity or lack
nonmarketable interests—within the context of a fair mar- marketability of private companies.
ket value business valuation—there is typically a valuation
consideration related to the discount for lack of marketability This article will summarize PCD empirical studies and discuss
(DLOM). That valuation consideration is often based on em- the merits of the two different approaches used by these stud-
pirical data as interpreted and applied by a BV professional. ies. If judiciously applied, the PCD may help an analyst support
the selection of a discount for lack of marketability. It also
Empirical data is primarily derived from equity studies. stands to reason that an analyst may consider PCD evidence
Widely used equity studies support DLOM decision making prior to, and in support of, selecting a financial fundamental
through analysis of restricted stock transactions and initial multiple to use in a guideline publicly traded company market
public offering (IPO) pricing. Empirical data from restricted approach analysis.
stock studies is based on a comparison of the price at which a
public company issues restricted stock to its publicly traded Private Company Discount Studies
stock price. Empirical data from IPO studies are based on a There are two primary methods used to identify PCD evidence:
comparison of an IPO share price with the price paid for shares the multiples approach and the acquisition approach. Both ap-
in a company before it went public. proaches are based on a comparison of financial fundamental
transaction multiples (FFTM)—such as transaction value as
Relying on data from public companies to estimate the DLOM divided by earnings before taxes depreciation and amortization
related to private companies, while very much relevant and (EBITDA) and transaction value as divided by sales—of pri-
commonly used in practice, has its limitations. That is because vate companies to publicly traded companies to derive a PCD.
restricted stock and IPO studies are based on studies of public
company equity pricing, and not on private company equity The main distinction between the two methods is that the mul-
pricing. Some professionals argue that a more direct method tiples approach relies on guideline publicly traded company
may be appropriate. Of course, in addition to using restricted value (public market-derived trading prices) in order to provide
stock and IPO data, a private company security valuation a means for comparison. This approach uses publicly traded
analysis will typically consider additional methods in order to company FFTM to compare to private company FFTM based
quantify or qualitatively address DLOM selection. on a private company acquisition transaction. The acquisition
approach exclusively relies on FFTM derived by acquisitions.
Additional DLOM support may include the consideration of That is, the acquisition approach relies on public company
published studies that rely on data from private companies acquisition transaction information as compared to FFTM of
to derive a private company discount (PCD). Though less private company acquisition transaction information.

Reproduced with permission from Business Valuation Alert,

published and copyrighted by Wolters Kluwer
2700 Lake Cook Road, Riverwoods, IL 60015
 The Acquisitions Approach
guidance for estimating the PCD, but revenue multiples did
Several studies and papers document PCD evidence based on not provide the same level of statistical significance.
the acquisition approach. In this section, I specifically focus on
the (1) Koeplin study, (2) Kooli study and (3) Officer study—as The Koeplin study concluded that private domestic companies
described in detail below. sold at multiples that were 20-percent to 30-percent lower
than the acquisition multiples of guideline public companies.
Koeplin Study (2000). One such study titled “The Private Foreign-based private companies sold at multiples that were
Company Discount” was authored by John Koeplin, Atu- lower by 40 percent to 50 percent from the acquisition mul-
lya Sarin and Alan C. Shapiro (the “Koeplin study”).1 The tiples of guideline public companies.
Koeplin study was conducted to determine if transaction
consideration paid for private companies was less than the Kooli Study (2003). The “Kooli study,” as published in
transaction consideration paid in transactions involving T he J ournal of P rivate Equity , provides additional
matched publicly traded businesses. The study presented PCD evidence.3 The Kooli study compared private company
results from two analyses based on (1) domestic transactions, transaction multiples, much like the Koeplin study, to public
and (2) foreign transactions. company transaction multiples. One of the primary differences
of the Kooli study is the use of a portfolio of guideline public
In order to conduct the analyses, Koeplin identified matched company transactions as the public company comparison
pairs (one private company transaction and one public compa- metric, and not just a single transaction. According to Kooli,
ny transaction) based on four-digit industry SIC code analysis, picking one public company transaction for comparison, as
proximity of transaction—within 12 months of one another— the Koeplin did, is a potentially noisy procedure for matching
and size, based on sales revenue. The search was conducted firm risk characteristics. Therefore, the Kooli study developed
to identify transactions that occurred between 1984 and 1998. a portfolio of public companies to use for comparison. This
The study identified transactions after removing (1) financial portfolio-approach methodology is credited to the work of
firm acquisitions, (2) regulated utilities business acquisitions Brav, Geczy and Gompers.4
and (3) acquisitions involving less than a controlling interest.
Kooli suggested that the Koeplin study had certain weak-
The Koeplin study identified 84 domestic company matched nesses. For example, private companies in the sample were
pair transactions and 108 foreign company matched pair trans- typically smaller and had different growth rates than the
actions using the SDC Merger and Acquisition Database (SDC). matched public companies. The Koeplin study did not con-
sider differences in employment contracts for key managers
After identifying matched pair transactions, Koeplin calcu- due to the acquisition. These differences may be a form of
lated four Enterprise Value transaction multiples.2 The PCD financial consideration provided to entice management to
calculation was based on the percentage difference between agree/approve a transaction.
the mean and median in-
dications of the transaction
multiples. This calculation Table 1 — Koeplin Study: Private Company Discount
was performed for the four Estimate Study Results for Transactions Occurring
transaction multiples of
the (1) private company
Between 1994 and 1998
transaction multiples and Private Company Public Company Private Company
(2) public company trans- Transaction Transaction Discount Estimate
action multiples. Multiples Multiples [a]
Domestic Company Transaction Data Mean Median Mean Median Mean Median
The results of the Koeplin Enterprise Value/EBIT [b] 11.76 8.58 16.39 12.37 28.26 30.62
study, for the 84 domes- Enterprise Value/EBITDA [c] 8.08 6.98 10.15 8.53 20.39 18.14
tic company and the 108 Enterprise Value/Book Value 2.35 1.85 2.86 1.73 17.81 -7.00
foreign company-based Enterprise Value/Sales 1.35 1.13 1.32 1.14 -2.28 0.79
transaction matched pairs,
Foreign Company Transaction Data
are presented in Table 1.
Enterprise Value/EBIT 16.26 11.37 28.97 12.09 43.87 5.96
The study used a regres- Enterprise Value/EBITDA 11.96 7.10 25.91 9.28 53.85 23.49
sion analysis to test sta- Enterprise Value/Book Value 2.41 1.35 3.70 1.68 34.86 19.64
tistical significance. The Enterprise Value/Sales 2.63 1.35 4.59 1.63 42.70 17.18
study results indicated that [a] Private Company Discount = 1- (private company transaction multiple ÷ public company transaction multiple).
earnings multiples provid- [b] EBIT = Earnings Before Interest and Taxes.
ed statistically significant [c] EBITDA = Earnings Before Interest, Taxes, Depreciation, and Amortization.

2
The Kooli study recognized the Koeplin study’s weak- study focused on private and public company transactions
nesses and attempted to control for these weaknesses. between 1995 and 2002. These transactions were controlling
In general, the Kooli study used similar procedures to interest transactions for U.S.-based companies.
those used in the Koeplin study with the exception of its
matching procedures (i.e., using a portfolio approach for The Kooli study found that transaction multiples of public
transaction matching). companies were typically greater than the transactions
multiples of private companies. More specifically, the
The Kooli study identified 331 private company transactions transactions multiples based on sales, earnings and cash
using the DoneDeals database and the SDC database. The flow were greater by 17 percent, 34 percent and 20 percent,
respectively.

Table 2 — Kooli Study: Median Discount Indications The Kooli study used re-
Across Industry Categories Study Results for Transactions gression analysis to identify
contributing factors that
Occurring Between 1995 and 2002 may help to explain the
Discount Discount Discount variation of PCD observa-
Indication Indication Based Indication
Based on Trans- on Transaction Based on Trans- tions. The study concluded
action Multiple Multiple Price/ action Multiple that the PCD varied due to
Price/Sales Earnings Price/Cash Flow firm characteristics and in-
Industry Sector (%) (%) (%) dustry classification. For ex-
Agriculture and Mining -58.6 49.0 31.5 ample, companies that were
Construction 70.2 59.0 19.1 classified as large and grow-
Manufacturing 36.7 a 30.5 b 21.6 ing generally had a smaller
Transportation and Communication -30.3 18.1 21.6 PCD than small companies
with lower growth.
Wholesale and Retail Trade 60.1 a 55.7 -10.4
Finance, Insurance, and Real Estate -35.3 b 29.2 a  3.8
The results of the Kooli
Services 15.4 33.6 b 34.1 study as classified by in-
a. Statistically significant at the 1 percent level. dustry sector, including the
b. Statistically significant at the 5 percent level.
identification of statistical
significance, are provided
in Table 2.
Table 3 — Officer Study: Private Company Discount
Estimate Study Results for Transactions Occurring The Kooli study found that
Between 1979 and 2003 private companies operat-
ing in the wholesale and
Private Company Target Unlisted Subsidiary
Discount/(Premium) to Company Target Discount retail trade industry and
Public Company Target to Public Company Target construction industry sec-
Financial Transaction Metric (%) (%) tors transacted at greater
Price to Book Value of Equity Average -15.61 27.47 discounts than businesses
operating in most other
Price to Book Value of Equity Median -15.22 35.18 industries. In general, the
Number of Transactions (in #) 106 145 results suggest that the
Price to Earnings Per Share Average 22.85 28.90 PCD varies by industry.
Price to Earnings Per Share Median 27.82 38.03
Number of Transactions (in #) 148 136 The Kooli study also pre-
Deal Value to EBITDA Average 17.18 26.91 sented a regression analy-
Deal Value to EBITDA Median 20.14 35.07 sis to determine statistical
significance of explana-
Number of Transactions (in #) 111 107
tory factors that impact
Deal Value to Sales Average 18.15 29.99
the PCD. The regression
Deal Value to Sales Median 18.72 40.91 results indicated that the
Number of Transactions (in #) 308 590 PCD tends to be smaller
Average Acquisition Discount 17.28 28.31 for large (as measured by
Median Acquisition Discount 19.51 35.95 assets) and growing com-
Number of Transactions (in #) 364 643 panies. The study results

3
 also suggest that there are many unexplained variables that current dates—that is, it was conducted over the 1999–2006
impact the PCD. time period. The De Franco study is considered to be similar
to the Officer study. That is, it uses similar two-digit SIC code
Officer Study (2007). The “Officer study,” published in the matching procedures.
Journal of Financial Economics, provides another perspec-
tive of PCD evidence.5 One of the primary purposes of this study, The Block study, as published in 2007, reported PCD indications
in addition to calculating the PCD, was to determine if illiquidity of 14 percent based on enterprise value-to-book value multiple
of the target company influenced the size of PCDs. To determine analyses and 24 percent based on enterprise value-to-revenue
if illiquidity influenced PCDs, the Officer study analyzed both multiple analyses. The De Franco study, as published in 2007,
(1) private company acquisition pricing multiples and (2) unlisted reported PCD indications of between 21 percent to 37 percent.
subsidiary acquisition pricing multiples, to compare to (3) public
company acquisition pricing multiples. Another acquisition approach study not specifically addressed
herein is the James A. DiGabriele study (“DiGabriele study”).7
The Officer study initially identified 12,716 company acqui- The DiGabriele study presents a statistical analysis used to
sition bids (both successful and unsuccessful) using SDC. investigate the impact of the Sarbanes-Oxley Act of 2002
The search was conducted to find transactions that occurred (SOX) on private company valuation.
between 1979 and 2003. The study then actively eliminated
transactions in which SDC merger and acquisition transaction According to the DiGabriele study, transaction data sug-
data was incomplete. gests that the PCD is greater post SOX than it was pre SOX.
Therefore, valuations of private companies were adversely
In order to measure the private company (and unlisted subsid- impacted by SOX. According to the study, this impact is
iary) acquisition discounts, the comparable industry transaction generally due to SOX compliance costs. These costs include
method was used. For this method, Officer formed portfolios of increased due diligence costs that a public company typically
publicly traded acquisition targets to compare to each unlisted incurs after acquiring a privately held company in order to
target, similar to procedures used in the Kooli study. comply with SOX.

Portfolio selection was based on finding (1) public targets in the The Multiples Approach
same two-digit standard industrial classification (SIC) code as The John K. Paglia and Maretno Harjoto study (“Pa-
the unlisted target, (2) deal value excluding assumed liabilities glia study”) attempted to determine if a PCD can be
within 20 percent of the unlisted target deal value and (3) acquisi- quantified based on a multiples approach analysis. 8
tions that were announced within a three-calendar-year window According to the Paglia study, acquisition multiples studies
centered on the announcement date of the unlisted acquisition. have weaknesses. The most significant weakness is lack of
good matches between private company transactions and public
The results of the Officer study, including number of observa- company transactions. In certain acquisition multiples studies,
tions per financial metric, are presented in Table 3. the sample sizes were less than 100 in total count. In certain
other studies, the matching criteria employed cast a relatively
Based on the Officer study results, unlisted targets—private wide net based on industry classification to establish matches—
companies and unlisted subsidiaries—are acquired at approxi- e.g., relying on two-digit SIC code matching. Another noted
mately 15-percent to 30-percent lower transaction multiples weakness is that it is unknown if any of the transactions used
relative to comparable publicly traded acquisition targets. for comparison incorporate strategic value.

According to Officer, and based on other evidence provided The Paglia study attempted to address weaknesses of the ac-
in the study, the study results support the hypothesis that quisition multiples approach by (1) identifying a larger group
acquisition prices are sensitive to the liquidity needs of the of comparable transactions, and (2) identifying better private
target company owners. As such, the study concluded that company and public company matches using a multiples ap-
selling parties are willing to sell assets at a discount because proach instead of the acquisition approach. This study com-
of liquidity needs. The greater the liquidity needs, the greater pares the value multiples derived by (1) public market pricing
the discount indications. of publicly traded stocks and (2) private company acquisition
transaction pricing.
Other Acquisition Studies. Other acquisition approach studies
not extensively discussed herein include (1) Block and (2) De Paglia Study (2010). The Paglia study’s quantification of the
Franco et al.6 I only mention these studies in passing because PCD is subject to the presumption that publicly traded market
these studies are considered to be similar to other PCD studies. prices approximate controlling interest values. This condition
is based on the premise presented by Eric Nath.9 If true, then
According to the Paglia study (which is discussed below), the the merger and acquisition (M&A) transaction values of pri-
Block study is an extension of the Koeplin study using more vate companies represent a similar level of value to publicly

4
traded company values since each value indication is based Based on the matching criteria, the Paglia study identified 674
on control-level pricing indications. matched pairs based on annual net sales and 635 matched pairs
based on EBITDA.
In order to quantify the PCD, or DLOM as Paglia refers to
it, the Paglia study relied on the following four analytical Third, market value of invested capital (MVIC) pricing mul-
procedures. tiples to (1) net sales and (2) EBITDA pricing multiples were
calculated for the matched pairs.
First, screening criteria were developed to identify privately
held company M&A transactions. The Paglia study used the Fourth, the study compared the matched pairs based on MVIC-
following methodology and screening criteria. to-sales and MVIC-to-EBITDA pricing multiple indications. The
differences between the matched pairs yielded DLOM estimates.
1. Privately held company M&A transactions, as provided in In general, the Paglia study found that all measures of market
the Pratt’s Stats database, occurring between 1993 to 2008 multiples—including MVIC/Sales, MVIC/Gross Profit, etc., for
2. M&A company targets with annual net revenues of at private companies were significantly less than the same multiples
least $10 million for publicly traded companies. That finding is generally consistent
3. M&A company targets located in the United States with the acquisition approach studies. In contrast, the study found
4. Companies classified as utilities, financial services and that mean and median profitability measures—i.e., return on eq-
other service related companies were excluded uity, net profit margins, etc.—for private companies were generally
equal to or greater than the matched publicly traded businesses.
Second, matching criteria were developed to identify publicly
traded guideline companies to match to the privately held The following two equations were used to calculate the private
companies involved in M&A transactions. The Paglia study company DLOM estimates:10
identified publicly traded companies listed on the AMEX,
NYSE and NASDAQ and matched them to privately held 1. DLOMSALE (%) = [1– (MVIC/Sale for private firm) /
companies based on a two-step procedure. (MVIC/Sale for public firm)] x 100
2. DLOMEBITDA (%) = [1– (MVIC/EBITDA for private
1. First, matching was performed based on industry clas- firm) / (MVIC/EBITDA for public firm)] x100
sification, as represented by six-digit North American
Industrial Classification System (NAICS) code matching.
Based on DLOMSALE calculations, private company transaction
2. Second, financial fundamentals of net sales and EBITDA
multiples were 67-percent lower, on average, than the similar
were used to identify matches. publicly traded companies, and 73-percent lower than similar
public companies based
Table 4 — Paglia Study: Private Company Discounts Across on median transaction
multiple indications.
Industry Sectors Study Results for Transactions Occurring
Between 1993 -2008 Based on DLOMEBIT-
2 Digit DA calculations, private
PCD DLOM PCD DLOM
NAICS Number of Based on Number of Based on MVIC/ company transaction
code Businesses MVIC/Sales Businesses EBITDA multiples were 66-per-
NAICS Code - Industry Sector (#) (#) (%) (#) (%) cent lower, on average,
Mining 18 18 70.40 22 67.00 than the similar publicly
Construction 22 22 58.97 35 52.37 traded companies, and
Manufacturing 31-33 257 71.79 245 76.46 72-percent lower than
Wholesale Trade 42 46 65.73 47 64.28
similar public companies
based on median transac-
Retail Trade 44-45 58 66.65 44 57.43
tion multiple indications.
Transportation 48-49 17 51.81 25 37.42
Information 51 92 88.91 65 83.65 The Paglia study pre-
Professional Services 54 84 81.20 51 88.70 sented two-digit NAICS
Staff Support & Waste 56 34 74.10 19 71.43 industry category sector
Management PCD indications. This
Healthcare 62 26 43.79 35 80.22 information is presented
Art & Entertainment 71 4 59.12 4 58.81 in Table 4.
Accommodation 72 15 62.82 18 76.01
& Food Service As presented in Table 4,
Total Number of Companies 673 610 companies in informa-

5
 tion and professional services sectors had the largest PCD These transactions provided evidence of PCDs of 17 percent
indications. In contrast, companies in the transportation sector using revenue-based transaction multiple comparisons, 34
had the lowest PCD indications. percent using earnings-based multiple comparisons and 20
percent using cash flow-based multiple comparisons.
In addition to the matched-pairs analysis, the Paglia study ex-
amined factors that influence the DLOM. More specifically, the As published in 2007, the Officer study identified various
study investigated the influence of size, profitability, financial private company transactions that occurred between 1979
distress, purchase and purchaser characteristics, market liquid- and 2003. These transactions provided evidence of PCDs of
ity, market volatility, time period and industry affiliation on 15 percent to 30 percent. The Officer study also presented
observed PCD. In order to study these influential factors, the evidence suggesting that the PCD is sensitive to the liquid-
Paglia study developed the following hypotheses: ity needs of the target private company owners. That is, the
greater the need for liquidity, the larger the PCD.
1. Larger firms have lower discounts.
2. Private firms with positive profits have lower discounts. The Kooli study and the Officer study were different than the
3. Private firms that are bought by strategic buyers have lower Koeplin study primarily due to company matching (private
discounts compared to those that are bought by financial to public) procedures. That is, the Kooli study and the Of-
buyers. ficer study used a portfolio matching approach in order to
4. Firms exhibiting greater risk of financial distress have higher match private companies to a portfolio of public companies.
discounts than those with lower levels of financial risk.
5. Discounts are larger due to decreased liquidity of public According to these studies, this matching approach was per-
markets. formed to lessen the potential noise that is often created by re-
6. Discounts are larger when public markets are more volatile. lying on only one statistical point of reference. In other words,
by relying on only one public company as a reference point,
A multivariate regression analysis was used to test the Paglia study certain differences between the public and private companies
hypotheses. In general, the regression results support several of can result in unintended analysis indications.
the Paglia hypotheses. The results indicated that private firms with
(1) a larger book value of assets, (2) positive net income and (3) As published in 2010, the Paglia study identified 674
lower probability of financial distress (that is, firms with higher matched pairs based on sales revenue and 635 matched pairs
Altman’s Z scores) had significantly lower PCD indications. based on EBITDA between 1993 and 2008. These transac-
tions provided evidence of PCDs of 66 percent to 73 percent.
In contrast, the regression results indicated that (1) the buyer The Paglia study used multivariate regression analysis to test
type (publicly traded company buyer or private company buy- certain hypotheses related to the level of PCD. The study
er), (2) the transaction type (asset purchase or stock purchase) found that larger and profitable private firms generally had
and (3) the organization type (C corporation or pass-through lower PCD indications.
entity) do not influence PCD indications. Furthermore, the
regression results (1) did not support the hypothesis that greater Collectively, these studies provide evidence that private com-
discounts are observed when market volatility increases, and panies often sell at lower multiples than their public counter-
(2) indicated only mild support for greater discounts when parts. These lower multiples are likely influenced by the lack
market liquidity decreases. of liquidity/marketability of private company ownership as
compared to public company ownership.
Summary and Conclusion
All studies discussed herein provided evidence of PCDs. Therefore, when valuing a private company, by reference to
These studies identified PCD evidence using the acquisition an otherwise-similar but public company, a DLOM should
approach and the multiples approach. Of the listed studies, typically be considered when the public company multiples
only the Paglia study employed a multiples approach to are not otherwise adjusted. In general, study research suggests
estimate the PCD. that transaction multiples are influenced by subject company
size and profitability.
As published in 2000, the Koeplin study identified 84 domestic
company matched-pair transactions and 108 foreign company In addition to citing PCD evidence as a factor used to support
matched-pair transactions that occurred between 1984 and DLOM decision making, another practical use of the PCD
1998. These transactions provided evidence of PCDs of 20 evidence, and more specifically the Paglia study data, is in
percent to 30 percent for domestic company transactions and the context of a market-based valuation approach—primarily
40 percent to 50 percent for foreign company transactions. the guideline publicly traded company method.

As published in 2003, the Kooli study identified 331 private A valuation analyst might consider citing PCD data as
company transactions that occurred between 1995 and 2002. means to support the selection of a guideline pricing

6
multiple to apply to a subject private company financial amination of the Private Company Discount: The Acquisition Approach.”
fundamental. In other words, if guideline publicly traded The Journal of Private Equity, Summer 2003.
companies are trading at an average of 10 times EBITDA, an 4
Brav, A., C. Geczy, and P. Gompers. “Is the Abnormal Return Following
analyst might consider citing the Paglia study as a reference Equity Issuance Anomalous?” Journal of Financial Economics, 56
to support a lower-than-average market-based valuation (2000), pp. 209–249.
analysis conclusion. ◆ 5
Micah S. Officer, “The price of corporate liquidity: Acquisition discounts
for unlisted targets,” Journal of Financial Economics, 83, (2007),
Kevin M. Zanni, ASA, CBA, CVA, CFE, is a manager in the 571–598.
Chicago office of Willamette Management Associates, a valu- 6
Stanley Block, “The Liquidity Discount in Valuing Privately Owned
ation consulting, economic analysis, and financial advisory Companies.” Journal of Applied Finance, Fall Winter 2007.
services firm, www.willamette.com. He may be reached by Gus De Franco, Ilanit Gavious, Justin Jin, and Gordon D. Richard-
email at kmzanni@willamette.com or (773) 399-4333. An son, “Do Private Company Targets that Hire Big4 Auditors Receive
earlier article written on this topic by Kevin Zanni, “Private Higher Proceeds?” University of Toronto Working Paper, December
Company Discount Studies,” appeared in the July/August 2014 19, 2008.
issue of The Value Examiner. 7
James A. DiGabriele, “The Sarbanes-Oxley Act and the private company
discount: An empirical investigation,” Critical Perspectives on Ac-
Endnotes counting, Volume 19 Issue 8, December 2008.
1
John Koeplin, Atulya Sarin, and Alan C. Shapiro, “The Private Company
8
John K. Paglia and Maretno Harjoto, “The Discount for Lack of Marketability
Discount,” Journal of Applied Corporate Finance, Volume 12 Num- in Privately Owned Companies: A Multiples Approach,” Journal of Busi-
ber 4, Winter 2000. ness Valuation and Economic Loss Analysis 5, n. 1 (2010): Article 5.
2
Enterprise value = number of targeted shares multiplied by offering price
9
Nath, Eric W., “Control Premiums and Minority Interest Discounts in
plus the book values of (1) short-term debt, (2) straight debt, (3) convert- Private Companies.” Business Valuation Review, June 1990, 39–46.
ible debt, and (4) preferred stock less marketable securities.
10
The Paglia study excluded outlier DLOM indications. That is, the study only
3
Maher Kooli, Mohamed Kortas, and Jean-Francois L’Her, “A New Ex- relied on DLOM indications that fell between zero percent and 100 percent.