Valuation Methods and Estimates in Relationship to Investing versus Consulting

Abstract

This study examines which techniques are most used by practicing analysts in establishing the value of a small, closely-held firm and whether these valuations converge with the actual fair market price negotiated in the sales of firms. An experiment was conducted using a case study of one small firm. A wide variety of specific approaches were observed and valuations tended to be conservative. Implications for future research are discussed.