The Market Approach to Valuing Businesses / Edition 1

The Market Approach to Valuing Businesses / Edition 1

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by Shannon P. Pratt
     
 

The market approach to valuing businesses is increasingly becoming a popular way to determine a business's value-for both buyers and sellers. Praised for its objectivity, this approach consists of reviewing the annual sales and other financial variables of comparable businesses for guidance in valuation. And when well implemented, the market approach is the model

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Overview

The market approach to valuing businesses is increasingly becoming a popular way to determine a business's value-for both buyers and sellers. Praised for its objectivity, this approach consists of reviewing the annual sales and other financial variables of comparable businesses for guidance in valuation. And when well implemented, the market approach is the model most favored by the IRS and the United States Tax Court.

Given that the market approach is a dynamic one, where can you turn to help ensure effective market approach implementation? Enter Shannon Pratt's The Market Approach to Valuing Businesses.

An essential guide for anyone who owns a small or large business, a professional practice, or a partial interest, The Market Approach to Valuing Businesses covers applications including:

• Pricing for purchases and sales

• Marital dissolution property valuation

• Valuation for gift and estate taxes

• Shareholder matters, such as dissenting stockholder suits, minority oppression actions, and resolutions of value under buy-sell agreements

The Market Approach to Valuing Businesses is generously supplemented with illustrative examples and sample cases, an extensive bibliography, an appendix on data resources, and up-to-the-minute information on recent developments such as the SEC's Electronic Data Gathering and Retrieval (EDGAR) system.

From providing definitions of basic and more complex terms to comparing and reconciling different market approach valuation methods and presenting comparative market value tables, The Market Approach to Valuing Businesses offers a state-of-the art treatise for both valuation professionals and nonprofessionals.

Whether you're a business valuation analyst, an acquirer, a seller, an intermediary, or in the legal field, The Market Approach to Valuing Businesses will show you why the market approach is a pragmatic, viable solution for present and future businesses.

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Product Details

ISBN-13:
9780471359289
Publisher:
Wiley
Publication date:
11/03/2000
Pages:
400
Product dimensions:
6.10(w) x 9.00(h) x 1.01(d)

Meet the Author

SHANNON P. PRATT is a founder and managing director of Willamette Management Associates, the managing owner of Business Valuation Resources, LLC, and a member of the board of directors of Paulson Capital Corp. He holds a doctorate in business administration from Indiana University. Dr. Pratt is author of Business Valuation Body of Knowledge: Exam Review and Professional Reference (Wiley); Cost of Capital: Estimation and Applications (Wiley); and The Lawyers Business Valuation Handbook. He is coauthor of Valuing a Business: The Analysis and Appraisal of Closely Held Companies, Fourth Edition; Valuing Small Businesses and Professional Practices, Third Edition; and Guide to Business Valuations, Tenth Edition.

Contributors:
STACY ISON ("The Market Approach in the Courts," Chapter 19) is managing editor of Shannon Pratt’s Business Valuation Update™. DOUG TWITCHELL ("Comparative Financial Analysis," Chapter 8; "Compiling Useful Market Value Tables," Chapter 9) and CHAD PHILLIPS (sample cases, Chapters 13 and 14) are comanagers of Pratt’s Stats™. ALINA NICULITA, an intern at Business Valuation Resources, LLC, prepared Appendices A and B. Z. CHRISTOPHER MERCER ("The Quantitative Marketability Discount Model," Appendix D) is CEO of the Mercer Capital business appraisal firm. PAUL HEIDT, a financial analyst at Business Valuation Resources, LLC, compiled Appendix E.

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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 and Acquisition Market Data.

7. Adjusting Financial Statements.

8. Comparative Financial Analysis.

Part III. Compiling 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.

Appendixes.

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 Stats Data Contributors.

Index.

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