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disregarding the book value buy-sell price, but otherwise taking
into account all other provisions of the buy-sell agreement. The
reports outlined four generally accepted approaches for valuing
closely held companies: (1) The guideline company method, (2)
the discounted cash-flow method, (3) the asset accumulation
method, and (4) the transaction method.
The guideline company method is a market-based valuation
approach that estimates the value of the subject company by
comparing it to similar public companies. First, a group of
comparable “guideline” companies is selected and analyzed; then
market multiples are derived and applied to the financial
fundamentals of the subject company. Financial fundamentals
include various measures of operating revenue, income, underlying
asset values, and unit volume of production. This method yields
the value of a marketable minority interest because value is
determined based on publicly marketable minority interests in
companies that have registered and traded securities.
The discounted cash-flow method is an income approach based
on the premise that the subject company’s market value is
measured by the present value of future economic income it
expects to realize for the benefit of its owners. This approach
analyzes the subject company’s revenue growth, expenses, and
capital structure, as well as the industry in which it operates.
The subject company’s future cash-flows are estimated, and the
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