In this class, we looked at valuing private companies, starting by listing the key differences between public and private companies in information available. We then talked about why motive matters in private company valuation, and why the value attached to a private business can be very different for a private (undiversified) buyer, as opposed to a diversified investor. We also talked about adjusting cash flows for owner salaries and key person discounts. Finally, we examine the consequences of illiquidity for pricing/valuing private businesses, and looked at approaches to estimating an illiquidity discount.
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