No hats involved – Discounts for lack of marketability call for a detailed process
Abstract: When calculating any valuation adjustment, an appraiser obviously can’t just pick a number out of a hat. But the discount for lack of marketability (DLOM) is an often-contested valuation adjustment that requires a particularly detailed process. This article shows how appraisers use empirical evidence, such as restricted stock studies and pre-initial public offering studies, to quantify a DLOM percentage for noncontrolling private business interests. But appraisers are also digging deeper than just empirical study averages to obtain more meaningful, defendable comparisons.