Calculating DLOMs for Minority and Controlling Interests & How to Value Privately Held Promissory Notes

Description

The purpose of this presentation is to examine the leading edge techniques for calculating DLOMs for minority and controlling interests. For controlling interests, we will evaluate the pros and cons of applying a DLOM and what data is available to support DLOMs. For minority interests, we will examine both the qualitative methods and the quantitative methods for determining DLOMs and look at court scrutiny of the methods. By the end of the presentation, we will learn why the rate of return of an investment is critical to support an adjustment for lack of marketability and how to quantify, calculate and defend your discount for lack of marketability.

Privately held promissory notes need to be valued for gift/estate tax purposes as well as related party transactions. However, the use of corporate bonds from publicly traded companies to determine an interest rate are not comparable because publicly traded companies are large, diversified and represent much lower risk. Business Development Corporations (BDCs) are publicly traded entities that make loans to small and medium size privately held businesses. BDC rates can be used to accurately calculate a market interest rate. This presentation discusses the issues with privately held promissory notes, how to value them using BDC rates and presents real world examples to illustrate the methodology.

This course is part of the 2024 Forensic and Valuation Services Conference Bundle. Purchase the conference bundle here.