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We are unpersuaded by Mr. Herber’s conclusions. In the
first instance, his recommended 25-percent marketability discount
is very nearly at the rock bottom (rather than at the “slightly
lower end”) of the 24- to 45-percent range he says is indicated
by the restricted stock studies he analyzed. Furthermore, we
question his 24-percent lower range limit.14 He himself states
that most of the restricted stock studies showed median
marketability discounts in a range from 30 to 35 percent.
In his analysis of the Management Planning, Inc. study, Mr.
Herber compared RBI with the grouping of companies with gross
incomes of $10 to $30 million. The transactions involving those
14 Mr. Herber cites only two studies that he says indicate
median discounts of 24 percent or lower. One of those studies is
the Securities and Exchange Commn. Institutional Investor Study
(SEC study). See Securities and Exchange Commn., Institutional
Investor Study Report, H.R. Doc. 92-64 (Vol. 5), 92d Cong., 1st
Sess. (1971). On cross-examination, however, Mr. Herber was
unable to respond satisfactorily to the estate’s contention that
the SEC study describes various categories of sales transactions,
and that the category for nonreporting over-the-counter
companies, which are most comparable to smaller businesses like
RBI, shows a median price discount of 32.6 percent.
Mr. Herber also relied on the “Hall/Polacek study” which, in
his opinion, indicated a mean discount of 23 percent. See Hall &
Polacek, “Strategies for Obtaining the Largest Valuation
Discounts,” Estate Planning (Jan./Feb. 1994). The Hall/Polacek
study also indicates, however, that “Lack of marketability
discounts appear to increase as the capitalization of the
corporation decreases below $50 million (30%-40%) compared to
corporations with capitalizations in excess of $100 million (10%-
20%).” Id. at 43-44. Because RBI’s capitalization was below
$50 million, the Hall/Polacek Study would appear to indicate a
higher discount (30 to 40 percent) than the mean discount of 23
percent upon which Mr. Herber relied.
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