Customer Reviews

Principles of Private Firm Valuation (Wiley Finance)

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I read this for a CPE course. The author takes you through the world of valuing privately held firms. This includes; Cash flow methods, comparative equities, estimating cost of capital, debt ratios and their effects, S corps vs C corps, controlling ownership premium, reliability of records, taxes, etc. The book does more than just cover the mechanics, it makes informed judgements as to which methods of valuation are appropriate in which circumstances. Some factors are indicated as possibly increasing or decreasing a firm's value.
Included are all the equations to support the text. The text is such that you can read right around most of the equations and not miss any of the principles.
I have done some valuations and I found this book to be very informative. There's more useful information here than in books many times as thick.

Feldman offers practical advice in the tricky task of valuing a firm that has no publicly traded stock. There are many intangibles. But the book gives methodologies to systematically assess in a rational manner what these might be.

Take trying to find the beta. How to do so for a private firm? The book clearly sets out the steps of - 1. estimating the beta for the firm's industry. 2. tweaking this for time lag effects. 3. change the beta to account for the firm's size. 4. ditto, but now for the firm's capital structure.

Granted, steps 2, 3 and 4 can still be quite involved. And you might well have to still do subjective assessments within each. But the overall procedure is at least conceptually clear.

The book has many other procedures that you should find useful.

Stanley's book on valuing businesses is basically useless in today's environment where many startup firms do not have five year's worth of financial data, are not cash flow positive, and have uncertain go-forward projections due to the state of the economy/industry they're operating in.

The guy is purely an academic who has difficulty explaining what should be rather simple concepts. There are much better valuation books and resources out there, namely the one by McKinsey and anything by Damodaran. Avoid this one.