The Matched Pairs Approach

, By Maretno Agus Harjoto & John K. Paglia

A new way to calculate discounts for lack of marketability finds that DLOMs for private companies should be dramatically larger than what's currently being claimed

By Maretno Agus Harjoto & John K. Paglia

Perhaps nothing in business valuation is more controversial than the discount for lack of marketability (DLOM).1 This one adjustment can have a sizable impact on clients' tax obligations. So, naturally, one question frequently lingers in attorneys' minds at the end of estate-planning engagements: Did the business appraiser select an appropriate discount?

We offer a way to calculate DLOM using a unique empirical approach that directly compares privately held companies to publicly traded counterparts.

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