Valuation Perspectives for the Private Markets

This chapter discusses the valuation perspectives for the private markets. It provides an overview of valuation and how to frame the valuation analysis in the context of doing deals and describes the fundamental concepts underlying private business valuation. Valuing a business is a blend of art and science, with a reasonable level of subjectivity. Private business valuation can be viewed through different standards of value. Private securities do not have access to an active trading market and therefore must rely on point-in-time appraisal or be involved in a transaction for their value to be determined. The chapter illustrates a number of concepts of value in terms of purposes, functions, and authorities, which indicates a universe of appraisal possibilities currently beyond the scope of most appraisers. Each value world is likely to yield a different value indication for a business interest. Private business valuation is a range concept. A privately held company has at least as many correct values at any given point in time as the number of value worlds. Valuation of companies continues to be part art and part science, supported by research and new methods. Transaction Valuation is an alternative approach being used by some middle market M&A advisors.