Essay on the Integrated Theory of Business Valuation (in Russian)

Abstract:     
This text proceeds to relate to the Russian-speaking audience of Business Valuers the Integrated Theory of Business Valuation developed a few years ago by Chris Mercer (2004). The 'levels of value' diagram advocated by Mercer is fully expounded and defended. Appendix A contains some corollaries from the theory not included in the Mercer's text which have the direct bearing on the corporate divedend policy in the absense of 'economic profits'. Appendix B can't but focus on the analysis of the dichotomy between the deductive-style reasoning implicit in the Mercer's QMDM model for deriving marketability discounts and the widely-prevalent emperical deductions of DLOM which are not at all convincing for the area of private business Valuations. The conclusion is that emperical-minded treatment of DLOM based on data from public markets might be fully irrelevant for the practice of valuing private businesses. It is also illustrated that the practice of lack-of-control and DLOM discounts implementation prevalent in Russian business valuation practice is doing a great damage to company owners, including in the privatization deals.In this context the QMDM model is seen as the only way forward.

Number of Pages in PDF File: 24

Keywords: Business Valuation (BV), The Integrated theory of BV, Quantitative marketability discount Model (QMDM), Discount for lack of marketabilty(DLOM) adjustment, 'levels of value' diagram in BV, dividend reinvestment policy

JEL Classification: D46, G12

Accepted Paper Series