Business valuations frequently play a critical role in legal matters involving closely held companies, including shareholder disputes, business transactions, estate and gift planning, marital dissolution, succession planning, and other matters in which the value of a business or ownership interest is at issue. For attorneys advising clients in these matters, understanding how valuation professionals identify and account for risk is essential to evaluating valuation conclusions and effectively working with financial experts.
This course examines how company-specific risk, ownership rights, and marketability can affect the valuation of a closely held business or ownership interest. Participants will learn how operational, commercial, financial, legal, and governance risks may influence a valuation and how valuation professionals incorporate those risks into discount rates and other valuation assumptions. The program also examines discounts for lack of control (DLOC) and lack of marketability (DLOM), including the significance of ownership and voting rights, transfer restrictions, shareholder agreements, liquidity, and company-specific circumstances.
Through practical examples, valuation methodologies, IRS guidance, and relevant case law, attorneys will learn how to identify assumptions that warrant closer examination, recognize potential double counting of valuation risks, and ask more effective questions when reviewing or challenging a valuation report.
Learning Objectives for Attorneys:
*Identify company-specific risks that may affect the valuation of a closely held business, including operational, commercial, financial, legal, regulatory, governance, and key-person risks.
*Evaluate how valuation professionals incorporate risk into valuation conclusions, including the relationship among expected earnings, growth assumptions, discount rates, and company-specific risk premiums.
*Analyze ownership and governance rights relevant to a valuation, including voting power, decision-making authority, veto rights, transfer restrictions, shareholder agreements, and other factors affecting control.
*Distinguish between discounts for lack of control (DLOC) and discounts for lack of marketability (DLOM) and identify circumstances in which each adjustment may—or may not—be appropriate.
*Evaluate the factual and legal support for valuation discounts, including relevant IRS guidance, empirical valuation data, and judicially recognized factors used to assess marketability.
*Identify potential weaknesses in a valuation analysis and formulate questions for valuation experts, including whether risks have been double counted and whether the applicable standard of value and jurisdiction permit the proposed adjustments.
Sri Chakravarty specializes in business valuations, business plans, and integrated financial projections for companies seeking debt or equity financing, ownership transitions, or strategic growth.