Chapter 10

Analysis and Valuation of Privately Held Firms

Abstract

In most M&A deals, the target, acquirer or both are privately owned. And, in contrast to transactions involving publicly listed acquirers and target firms, acquirers often display statistically significant and positive abnormal announcement date financial returns. This chapter details the hazards of dealing with both limited and often unreliable data associated with private firms. This chapter then focuses on how to properly adjust problematic data as well as how to select the appropriate valuation methodology and discount rate for valuing privately owned firms. Considerable time is spent discussing how to apply control premiums, minority discounts, and liquidity discounts ...

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