Articles, Papers & Publications

Directly Valuing Private Minority Interests Using the Income Approach
Financial Valuation and Litigation Expert, Issue 55, June/July 2015, Pp 8-14. This paper synthesizes the research and ideas developed by the author over the last 30 years which challenge control premiums, cost of capital and discounts for lack of control and lack of marketability. The income approach provides appraisers with an integrated and consistent framework for valuing private minority interests. The author shows why the traditional discounted net asset value approach cannot work and explains how the income approach is a far more realistic method for reflecting how investors in the real world behave. The reality is, underneath every discount is an income approach. Discounted NAV is dead.

Views on Control Premiums
BV Success, December 2013, Issue 17-49, published by the Business Valuation Committee of the American Society of Appraisers. Although public company shares may be minority interests, they do not trade as if they are. Public company shares trade at public market prices, not at minority prices. This article is the final nail in the control premium coffin.

Best Practices Regarding Control Premiums: Comments on the Appraisal Foundation’s Proposed White Paper on Control Premiums
The Journal of Business Valuation, 2012, Volume 1, published by the Canadian Institute of Chartered Business Valuators (CICBV). While the accounting profession should be able to create the rules by which various assets are valued for financial reporting purposes, the application of a “control premium” to a public market proxy of value, whether through the market approach or the income approach, will almost always be misleading. If the matter is litigated, proponents who apply a control premium should be challenged under Daubert.

The Biggest Business Valuation Myth
Business Valuation Review, Fall, 2011, Volume 30, Number 3, published by the American Society of Appraisers (ASA). The traditional Capital Asset Pricing Model and Build-Up Method have failed to reliably quantify the required rates of return for equity holders. This paper discusses how profoundly business appraisers, the courts, investors, auditors and the general public have been misled into thinking that these methods are valid, and suggests a way forward using an on-line survey method (the Pepperdine University Survey).

Valuing Fractional Interests in a Vacation Home: a Conversation with Eric Nath
Business Valuation Update, September, 2010. This article discusses many of the unique factors to consider when valuing fractional interests in real property.

Procedural Guidelines 2 – Valuation of Partial Ownership Interests
American Society of Appraisers Business Valuation Standards, November, 2009. This is the first and only substantive guidance on valuing minority and partial ownership interests ever published by an appraisal organization. Mr. Nath was the principal creator, motivator and author of this guidance.

How Public Guideline Companies Represent ‘Control’ Value for a Private Company
Business Valuation Review, December, 1997. This article provides an improved valuation model applicable to private companies. Based on the fact that in the real world there are really only two types of sellers in a private company – control sellers or minority sellers – it makes the case that the commonly-accepted “as if freely traded” level of value is a misleading concept and should be abandoned.

A Tale of Two Markets
Business Valuation Review, September, 1994. Discusses valuation differences between the M&A market and the public market. Proposes a new, systematic approach to valuing controlling and minority interests in private companies which will conform more closely to the “fair market value” standard.

Control Premiums and Minority Interest Discounts in Private Companies
Business Valuation Review, June, 1990. Presents a critical look at historical valuation approaches to control premiums and minority discounts. Outlines an improved approach for application of such factors in the valuation of closely-held business interests.

Valuing a Private Company – A Complex Task
California Business and Financial Bulletin, September, 1989. A primer on the valuation of private companies.