Calculating Reliable Discounts for Lack of Marketability for Minority Family Limited Partnership Interest using a Managed Asset Portfolio Market Analysis
AbstractWe develop a new method for calculating reliable discounts for lack of marketability (DLOMs) for minority family limited partnership (FLP) interests, which we term the Managed Asset Portfolio Market (MAPM) Analysis. DLOMs typically are the largest valuation adjustment in, and often the most contentious part of, appraisals of closely-held company interests. U.S. Courts and the SEC require appraisal experts to calculate objective, market-based DLOMs that satisfy the Courts’ “gatekeeping” test to be qualified as expert testimony in litigation. Appraisals of market value are rooted in Economics and, as such, are inseparably linked to an underlying analysis of supply and demand. Although economic theory and principles are not absent in Business Valuation theory and practice, a market analysis often is only an implicit, and at times an unrecognizable, part of them. The MAPM Analysis is built upon an explicit underlying economic foundation of market supply and demand, which, in conjunction with relevant market data, provides a reliable market basis for estimating DLOMs.
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Bibliographic InfoPaper provided by University of Connecticut, Department of Economics in its series Alumni working papers with number 2013-02.
Length: 30 pages
Date of creation: Mar 2013
Date of revision: Dec 2013
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Postal: University of Connecticut 341 Mansfield Road, Unit 1063 Storrs, CT 06269-1063
Phone: (860) 486-4889
Fax: (860) 486-4463
Web page: http://www.econ.uconn.edu/
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MAPM Analysis; closed end fund; CEF; family limited partnership; FLP; DLOM; discount for lack of marketability; discount for lack of a market;
Find related papers by JEL classification:
- D00 - Microeconomics - - General - - - General
- D40 - Microeconomics - - Market Structure and Pricing - - - General
- D46 - Microeconomics - - Market Structure and Pricing - - - Value Theory
- G12 - Financial Economics - - General Financial Markets - - - Asset Pricing; Trading Volume; Bond Interest Rates
- K00 - Law and Economics - - General - - - General (including Data Sources and Description)
- K41 - Law and Economics - - Legal Procedure, the Legal System, and Illegal Behavior - - - Litigation Process
This paper has been announced in the following NEP Reports:
- NEP-ALL-2013-06-04 (All new papers)
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