A clear – cut valuation of a private company is a necessity when faced with issues around stock transactions, estate planning, management planning, tax planning, company disputes and divorce settlements. Valuing a public company is much simpler because it is valued ever minute by the market in which its stock is traded. But, private companies don’t enjoy the same market for its equity interest, a clear – cut valuation may be difficult to conclude. The lack of the public market pricing information for private companies, there are only three way to value a private company:
- Asset Approach – based on the company’s assets and liabilities;
- Income Approach – based on the ability of the company to generate cash flow in the future; and
- Market Approach – based on the value of similar companies that are either public or have recently closed a transaction.
PAG’s team comprises of well experienced members in choosing the relevant valuation approach for each business case. The value of stock in a private company depends on its level of control and the degree to which its marketability is impaired (lack of a ready market versus an outright restriction on sale or transfer). We are acknowledgeable in the selection and support of discounts and premiums in our determination of value. In our own method, we conduct a proprietary discount and premium studies to provide a foundation for our conclusion.
Our valuation report provides the required support for companies, their owners and their advisors in making educated decisions on a sale or acquisition of a private company.