Working on a potential deal for repurchase of units from one of our investors. Based on our current company valuations, we'd like to factor in a discount for the unit ownership having a minority position in the company. Was just going to throw a 15-20% discount on the unit valuation but was looking for some kind of source(s) to back this number up. Could just be a WSJ article or something, don't really care just want to make it look like I'm not pulling that number out of my ass. Any ideas?
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A friend on the valuation team I have worked with in the past indicates that it is typically a 20-30% discount, but that it is entirely dependent on the type of company. His firm uses proprietary studies to determine the exact discount, but for a sizeable private company, it could approach 10% or less and for a very small private, it could exceed 30%.
There is also this: http://www.philipsaunders.com/TheFirm/Publications/ControlPremiums/tabi…
"It has been argued that the discount from net asset value at which closed end funds typically sell is a minority discount. Such discounts commonly exist in the zero to 20% range, even though the fund assets are publicly traded securities. However, closed end funds sometimes trade at a premium to net asset value. Other reasons for the existence of the discounts have also been put forward."
Hah I found that Saunders source, too, but don't want to send something to an investor that says "zero to 20%" and give them the impression that there isn't a discount. It's a pretty small company so 20% discount is probably conservative, but I'm looking for a balance so that they don't decide to hold the units, either. Thanks for the help.
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