The Private Company Discount for Operating Businesses


Discounting the expected net cash flows for a closely held business using an “as if public” cost of capital does not provide an estimate of the value of 100% of the closely held business. Even 100% of a closely held business suffers from a lack of liquidity.

In Chapter 22, we discussed discounts for lack of marketability for minority interests in non-publicly traded businesses. The empirical studies discussed therein provide data to help quantify the amount of such a discount in the case of minority interest transactions.

In this chapter, we discuss the appropriate discount for 100% of a private company compared to the value of a publicly traded equivalent company: the private company discount (PCD). The PCD is an entity level discount, applied to the value of the overall capital of the subject closely held business.


The case for discounts for lack of liquidity for controlling interest transactions (100% interests) is not as clear as for minority interests. Even though the owner(s) of the controlling interest typically have no legal restrictions restricting their selling a closely ...

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