Marketability Discount

A reduction applied to the value of an ownership interest to reflect the absence of a ready market for its sale. DLOM is commonly applied to interests in private companies where shares cannot be easily traded on a public exchange.

A reduction applied to the pro-rata value of a business interest to reflect the lack of control associated with a minority ownership position. Minority discounts account for the inability of minority shareholders to influence key decisions such as dividend policy, asset sales, and management appointments.

A reduction applied to the pro rata value of a business to reflect the disadvantages of owning a non-controlling interest, including inability to direct business strategy, set compensation, force distributions, or compel liquidation. The minority interest discount is the mathematical complement of the control premium and is typically applied when valuing interests of less than 50% in private companies.

A reduction to business value reflecting the risk that the departure of one or more critical individuals would materially impair the company's earnings, relationships, or operational capability. Key person discounts are most significant in professional services, early-stage ventures, and founder-led businesses where revenue concentration or specialised expertise is tied to specific individuals.

The phenomenon where the market values a diversified conglomerate at less than the aggregate value of its individual business units if they were operated independently. The conglomerate discount — typically estimated at 10% to 15% — reflects investor concerns about capital allocation inefficiency, cross-subsidisation, management complexity, and reduced transparency across disparate business lines.

The additional amount a buyer pays above the pro-rata market value of a company's shares to acquire a controlling interest. The control premium reflects the value of being able to direct the company's strategy, operations, capital allocation, and management.

A unique cryptographic token recorded on a blockchain that represents ownership of a specific digital or physical asset, such as artwork, music, collectibles, or virtual real estate. Unlike fungible tokens (such as cryptocurrencies), each NFT is distinct and cannot be exchanged on a one-for-one basis with another.

The process by which an employee or founder earns full ownership of equity over time, typically over a 3-4 year schedule. Vesting aligns long-term incentives with commitment and usually includes a cliff period (often 12 months) before any equity vests.

What is the weighted average cost of capital (WACC)?

WACC is the average cost of all capital sources (debt and equity) a company uses, weighted by their proportions — it is the minimum return the company should generate to satisfy all investors.

What discount rate should I use for intangible asset valuation?

Discount rates for intangible assets typically range from 10-25%, reflecting higher risk than the overall business WACC. Customer relationships sit at the lower end, while in-process R&D commands the highest rates.

What is the Multi-Period Excess Earnings Method (MPEEM)?

MPEEM isolates the earnings attributable to a single intangible asset by deducting charges for all other contributory assets from total earnings, then discounting the residual cash flows to present value.

How do private equity firms value portfolio companies?

PE firms typically use a combination of EBITDA multiples, discounted cash flow (DCF) analysis, and comparable transactions, with increasing focus on identifying and valuing intangible assets that drive sustainable growth.