Private Company Valuation
Value any sample company as if it were private: normalize its earnings, build a discount rate, compare three approaches, then carry a value down to a holding.
Learning focus: A private company value is only meaningful with its level stated, because who holds the shares decides which earnings count and which discounts apply.
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Ostrell Industries is valued here as if it were private. The file holds no owner pay or personal expenses for it, and the size premium, company premium, DLOC and DLOM are teaching stand-ins, so type your own.
Each bar is 100% of the equity at its own starting level, so a gap between colors is partly a gap in level.
| Approach | Starting level | Equity, 100% | Control | Marketable minority | Non-marketable minority |
|---|---|---|---|---|---|
| Capitalized cash flow | Control | 2,048.31 | 512.08 | 435.27 | 348.21 |
| Free cash flow | Control | 1,505.69 | 376.42 | 319.96 | 255.97 |
| Excess earnings | Control | 2,132.99 | 533.25 | 453.26 | 362.61 |
| Guideline public company | Marketable minority | 3,588.02 | 1,055.30 | 897.00 | 717.60 |
| Guideline transactions | Control | 2,428.32 | 607.08 | 516.02 | 412.81 |
| Adjusted net assets | Control | 1,497.10 | 374.28 | 318.13 | 254.51 |
In millions. A value that starts at marketable minority takes no DLOC. Its control column undoes that step, and only the DLOM remains on the way down.
A controlling buyer can reset owner pay, so the adjustments count and the income approaches sit at the control level. On capitalized cash flow, a 25.0% holding is worth $348.21m on a non-marketable minority basis, 32.0% below its pro rata control value. The approaches run from $1,497.10m to $3,588.02m, and part of that gap is level of value, not disagreement.