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Subject 1. Private and Public Company Valuation: Similarities and Contrasts PDF Download
Private and public companies are different in many ways. Company- and stock-specific factors are used to mark key differences. They may influence the selection of appropriate valuation methods and assumptions for private company valuations.

Company-Specific Factors

These factors characterize the company itself.

Compared to public companies, private companies:

  • Are typically at the earliest stages of development (stage in lifestyle) while public companies are well developed and further advanced.
  • Are typically smaller (size).
  • May not have agency issues (overlap of shareholders and management).
  • Have less management depth.
  • Lower quality of financial and other information.
  • Less pressure from short-term investors.
  • Tend to report less taxable income and tax payments (tax concerns).

Stock-Specific Factors

The characteristics of the stock of a private company are different from that of public companies. These factors are generally negative for private company valuation. Private companies usually have:

  • Less liquid equity interests.
  • Concentrated control.
  • Potential agreements restricting liquidity.

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