Can public stocks be used to value private firms?

Description

Abstract: Public and private businesses often differ significantly in terms of access to capital, product breadth and market reach. Still, many valuation professionals, along with the IRS and some courts, believe that the guideline public company method can work — under the right circumstances. But it takes an experienced valuator to know when and how to apply this method. This article explains the benefits and pitfalls of using the method and how to determine when it’s appropriate. (Updated 7/31/12)