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Private Capital Markets: Valuation, Capitalization, and Transfer of Private Business Interests + Website, 2nd Edition by Robert T. Slee

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CHAPTER 14

Other Value Worlds

There are a number of value worlds beyond those described in other chapters. Worlds emanate from the multitude of reasons for which a private appraisal might be needed. These reasons may require using specific methods or processes for the valuation, which causes a host of different value worlds. Some of the other worlds are briefly summarized in this chapter. These other worlds are no less important than previously mentioned worlds; they simply require less space to explain. This chapter describes six worlds and discusses the processes used to derive value in each:

1. Investment value world

2. Owner value world

3. Collateral value world

4. Early equity value world

5. Bankruptcy value world

6. Public value world

INVESTMENT VALUE WORLD

The world of investment value describes the value of a business interest to a particular investor with a given defined set of individual investment criteria. The criteria usually are stated as a compounded return expectation. Although this world does not necessarily contemplate a sale, that is the dominant reason for valuing a business interest in this world. Although similar in concept, there is a difference between investment value and market value. Exhibit 14.1 shows the salient differences.

The two worlds are connected; it is possible for them to derive the same value for a company. For instance, if PrivateCo is valued using the synergy subworld of market value, it is possible a particular buyer could have nearly ...

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