Introduction and Conclusion My musings on the use of restricted stock discounts to estimate marketability discounts (or DLOMs) have led me to the conclusion: Restricted stock studies/discounts cannot be used to estimate DLOMs in any credible, standards-compliant manner.  Three of the first four Mercer’s Musings posts address this issue. Mercer’s Musings #1: USPAP and the Internal Revenue Service Mercer’s Musings #2: Using Restricted Stock Studies to Support Marketability Discounts Mercer’s Musings #3: Marketability Discounts re Two Hypothetical Minority Interests Mercer’s Musings #4: Fac ..read more

My current series of blog posts is titled “Mercer’s Musings.”  In the first three “musings,” I addressed USPAP and the Internal Revenue Service and concluded that the answer to the question of whether to comply with USPAP is “Why not?”  And the answer holds regardless of any certifications appraisers might hold. The second and third musings address the issue of marketability discounts and conclude that it is not possible to comply with any valuation standards, whether USPAP or not, using only averages of restricted stock studies as a basis for “guessing” marketability discounts.&nbs ..read more

In Mercer’s Musings #2, we discussed the old and cold data on restricted stock transactions that have been misused by appraisers for decades.  My conclusion is that the various restricted stock studies are inadequate to meet current business valuation standards and that they should not be used as a basis for “guessing” the magnitude of marketability discounts for illiquid interests of closely held businesses.  This conclusion applies to all appraisals, including those prepared for the Internal Revenue Service. Some readers of this blog will want to disagree and say that the use of r ..read more

Mercer’s Musings #1 addressed the topic of compliance with USPAP and the Internal Revenue Service. This second musing addresses the use of restricted stock studies to support marketability discounts in gift and estate tax appraisals prepared for the Internal Revenue Service (or for anyone, for that matter).  This musing is addressed to all appraisers, regardless of which valuation credential(s) they hold.  Chapter 8 of Business Valuation: An Integrated Theory Third Edition (by Mercer and Harms) (“Integrated Theory 3”) contains a detailed discussion regarding restricted stock transac ..read more

Many years ago, I wrote a column for the Business Valuation Review that the editor, Jay Fishman, FASA, called “Mercer’s Musings.” In this blog and with this post, I reintroduce “Mercer’s Musings” because I would like to reflect on a number of seemingly unsettled issues in the business valuation world. This first musing relates to the need (or not) to comply with the Uniform Standards of Professional Appraisal Practice promulgated by The Appraisal Foundation in gift and estate tax appraisals prepared for the Internal Revenue Service. In a previous post on this blog, I wrote: … appraisers who ..read more

My walking journey began December 15, 2019, or three years, eleven months, and a couple of days ago.  I had no idea this journey would last going on for four years now.  But it has.  The journey has had a few phases. Initially, I was fixated on 10,000 steps per day, which was my minimum goal for a few months.  I met that goal for 450 consecutive days until an injury slowed me down for a couple of days. When I realized that 10,000 steps was, given my step length, just short of 5.0 miles, I raised the goal to a minimum of 5.0 miles per day, every day. When an occasional inj ..read more

I recently read a post on Chad Barr’s blog, Timeless Wisdom to Unlock and Thrive, that offered up some short and timeless nuggets of wisdom for those of us in the professional services world – and elsewhere, as well. Some of that wisdom included quotes by the following: Steve Jobs: “Start with the customer experience and work backwards.” Archimedes: “Give me a place to stand and I will move the world.” Mark Twain: “The secret of getting ahead is getting started.” Chad offered up a quote of his own, and the entire post (it is short) is a great read.  I commented on Chad’s post and repeat ..read more

Control/Lack Thereof or Expected Cash Flow, Growth, and Risk? My co-author, Travis W. Harms, CFA, CPA/ABV, and I have been doggedly insisting that business valuation questions, issues, premiums, discounts, and more be viewed through the combined lens of expected cash flow, its expected growth, and the risks associated with achieving the expected cash flows. See our Business Valuation: An Integrated Theory, Third Edition (“the Integrated Theory”).  This should not be surprising because the value of a business can be summarized using those three concepts: Value = CF(1) / R – G The equation ..read more

And, of course, Pickleball! Walking has become part of my daily life.  Some readers have been following my posts about walking for quite a while.  My current journey began 3 1/2 years ago on December 15, 2019.  As 2019 was drawing to a close, I realized that I had not been taking care of myself.  My weight had risen to 212 pounds, which was the highest it had ever been.  My cholesterol, blood pressure and a few other vital indicators were not in appropriate ranges.  I decided to change and began a journey of walking and other exercise that has changed my life for ..read more

This post was originally written for Mercer Capital’s Family Business Director Blog and offered advice to family business directors based on my observations following the failure of Silicon Valley Bank on March 10, 2023.  This failure was followed by Signature Bank on March 12, 2023, and First Republic Bank on May 1, 2023.  All three banks failed because of deposit withdrawals in excess of the banks’ abilities to fund them. Silicon Valley Bank was taken over, or at least substantial assets and liabilities were assumed, by First Citizens Bank & Trust Company (Raleigh, North Caro ..read more