The Market Approach to Valuing Businesses / Edition 2

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Overview

Your Best Approach to Determining Value

If you're buying, selling, or valuing a business, how can you determine its true value? By basing it on present market conditions and sales of similar businesses. The market approach is the premier way to determine the value of a business or partnership. With convincing evidence of value for both buyers and sellers, it can end stalemates and get deals closed. Acclaimed for its empirical basis and objectivity, this approach is the model most favored by the IRS and the United States Tax Court—as long as it's properly implemented.

Shannon Pratt's The Market Approach to Valuing Businesses, Second Edition provides a wealth of proven guidelines and resources for effective market approach implementation. You'll find information on valuing and its applications, case studies on small and midsize businesses, and a detailed analysis of the latest market approach developments, as well as:

  • A critique of US acquisitions over the last twenty-five years
  • An analysis of the effect of size on value
  • Common errors in applying the market approach
  • Court reactions to the market approach and information to help you avoid being blindsided by a litigation opponent

Must reading for anyone who owns or holds a partial interest in a small or large business or a professional practice, as well as for CPAs consulting on valuations, appraisers, corporate development officers, intermediaries, and venture capitalists, The Market Approach to Valuing Businesses will show you how to successfully reach a fair agreement—one that will satisfy both buyers and sellers and stand up to scrutiny by courts and the IRS.

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Editorial Reviews

Booknews
Explains the market approach to assessing the value of a business that reviews the annual sales and other financial valuables of comparable businesses for guidance in valuation. The author presents both the guideline public company method, where valuation multiples are developed by comparisons of a subject company with publicly traded comparables, and the guideline merged and acquired company method, where multiples are developed based on change of control transactions. Case studies of a sandwich shop and software developer are provided. An analysis of the effect of size on value, common errors in applying the market approach, and court reactions to the market approach conclude the book. Annotation c. Book News, Inc., Portland, OR (booknews.com)
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Product Details

  • ISBN-13: 9780471696544
  • Publisher: Wiley
  • Publication date: 11/25/2005
  • Edition description: REV
  • Edition number: 2
  • Pages: 432
  • Sales rank: 564,928
  • Product dimensions: 9.21 (w) x 6.14 (h) x 0.94 (d)

Meet the Author

Shannon P. Pratt, CFA, FASA, MCBA, CM&AA, is the Chairman and CEO of Shannon Pratt Valuations, Inc. a premier business valuation firm located in Portland Oregon, and is the founder and Editor Emeritus of Business Valuation Resources, LLC. Over a distinguished career of close to four decades, he has performed valuation engagements for M&A, ESOPs, gift and estate taxation, marital dissolution, shareholder oppression and dissent, and numerous other purposes. He has conducted numerous fairness and solvency opinions, has testified in a wide variety of federal and state courts across the country, and frequently participates in arbitration and mediation proceedings. Dr. Pratt is one of the most successful and respected authors in his field. He is the author or coauthor of several industry standards, including Valuing a Business: The Analysis and Appraisal of Closely Held Companies, Valuing Small Businesses and Professional Practices, The Market Approach to Valuing Businesses, Standards of Value, Business Valuation and Taxes, The Lawyer's Business Valuation Handbook, and Cost of Capital.

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Table of Contents

List of Exhibits.

Foreword.

Preface.

Acknowledgments.

Notation System Used in This Book.

Introduction.

PART I: DEFINING MARKET MULTIPLES AND MARKET APPROACH METHODS.

1. Defining Market Value Multiples.

2. The Guideline Public Company Method.

3. The Guideline Transaction (Merged and Acquired Company) Method.

4.Other Market Methods.

PART II: FINDING AND ANALYZING COMPARATIVE MARKET TRANSACTION DATA.

5. Finding Public Company Market Transaction Data.

6. Finding Merger amd Acquisition Market Data.

7. Adjusting Financial Statements.

8. Comparative Financial Analysis.

PART III: COMPLILING MARKET VALUE TABLES AND REACHING A VALUE CONCLUSION.

9. Compiling Useful Market Value Tables.

10. Selecting, Weighting, and Adjusting Market Value Multiples.

11. Control Premiums and Minority Discounts.

12. Discounts for Lack of Marketability.

PART IV: SAMPLE MARKET APPROACH CASES.

13. Small-Size Service Company Sample Case-Sub Shop.

14. Medium-Size Service Company Sample Case-Software Developer.

PART V: IMPORTANT ASPECTS OF USING THE MARKET APPROACH.

15. Reconciling Market Approach Values with Income and Asset Approach Values.

16. Does Size Matter? Evidence from Empirical Data.

17. Common Errors in Implementing the Market Approach.

18. The Dismal Track Record of U.S. Market Acquisitions.

19. The Market Approach in the Courts.

Appendix A: Bibliography.

Appendix B: Data Resources.

Appendix C: International Glossary of Business Valuation Terms.

Appendix D: The Quantitative Marketability Discount Model.

Appendix E: Pratt's StatsTM Data Contributors.

Index.

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Sort by: Showing all of 3 Customer Reviews
  • Anonymous

    Posted November 2, 2000

    Market Approach to Valuing Businesses

    The Market Approach to Valuing Businesses is the most comprehensive treatise on the subject ever -- complete methodology and latest comparative data sources for both control and minority interests. Includes many examples that focus on small and middle market companies and errors and examples of the courts' acceptance and objection of market approach evidence. Anyone appraising, buying, selling, or reviewing a market approach presentation will benefit from this book.

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  • Anonymous

    Posted November 2, 2000

    Market Approach to Valuing Businesses

    The Market Approach to Valuing Businesses delivers a long overdue resource to the business valuation profession. Both the seasoned veteran and those seeking to learn valuation fundamentals will gain significant value from this thoughtful and thorough presentation of the market approach. By providing easily readable and technically loaded narrative, helpful illustrations and instructive examples, and an extensive list of exhibits, Dr. Pratt equips the reader with a full set of market approach valuation tools.

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  • Anonymous

    Posted November 2, 2000

    Market Approach to Valuing Businesses

    Like Pratt's Cost of Capital, The Market Approach to Valuing Businesses will serve as a valuable standard reference book for all business appraisers, from the beginner to the experienced. Finally, we have a clear, concise resource on a complicated topic that we can all benefit from.

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