Business Valuation Review Volume 41: Issue 2

I hope this issue finds you well and you are enjoying the summer.

In this issue, Will Frazier explains the NICE Method and introduces the NICE-R model. Eric Sundheim, Ben Towne, and Jeff Faust provide their thoughts on the double backsolve method. Finally, Gil Mathews provides an excellent summary of the application of valuation discounts in oppression cases by state. Thanks to all of our authors for sharing their insights.

I would like to this opportunity to thank the Business Valuation Review's Editorial Review Board, who are all listed on this inside cover of the Business Valuation Review.

This article initially examines the mechanics of the established option pricing method (OPM) backsolve (OBS). It then quickly moves to a critical analysis of the more recently developed double backsolve (DBS) method, which certain practitioners have proposed as an alternative to OBS. We review the literature cited to support DBS and find it does not, in fact, support its use. In addition, we note some inconsistencies in the current use of DBS. We conclude that until better arguments are proffered or superior methods are developed, practitioners should continue to use OBS, and reviewers should continue to reject valuations relying on DBS.

The Nonmarketable Investment Company Evaluation (NICE) Method, a valuation method under the Income Approach to value, determines the fair market value of noncontrolling equity interests in closely held investment entities such as family limited partnerships.¹ In this paper I describe the theory of the method and the mechanics of its application in a valuation model. Recently, I have developed the Excel-based NICE-R Model, which is designed to be a transparent and user-friendly valuation tool.² Finally, while this paper provides the basic NICE Method theory and my interpretations as to how the data are applied, the user of the model has the freedom to disagree and substitute her or his own opinions.

This article discusses, on a state-by-state basis, the rejection and acceptance of discounts for minority interest and lack of marketability in appraisals and in oppression and voluntary withdrawal cases. Discounts for lack of marketability at the shareholder level are rejected in most jurisdictions, but some states, including California and New York, still permit them.

From the Editor

Double Backsolve Remains Unsupported

The NICE Method Theory and Application

Most States Reject Discounts in Appraisals and Oppression Cases—But There Are Important Exceptions

From the Chair

Why we do what we do…

Volume 41, No. 2 — Complete Issue

From the Editor

Customer Concentration: Good, Bad, or Ugly?

From the Chair

Delaware Valuation Decisions, 2021 to 2024

Volume 44, No. 1 — Complete Issue