Guideline Transaction Method (GTM): Discount for Lack Of Control (DLOC) and Discount for Lack Of Marketability (DLOM)

One prepared a database of price multiples from the sale of entire public and private companies to obtain the appropriate price multiples for a small and private company:

• When valuing a noncontrolling equity interest
• DLOC: Discount for Lack Of Control
• (1 - DLOC)(1 + Control Premium) = 1
• DLOC = 1 - (1/(1 + Control Premium))

• When valuing a company considering that its (equity) interest cannot be easily sold
• DLOM : Discount for Lack Of Marketability
• 1 - Total Discount = (1 - DLOC)*(1 - DLOM)
• Total Discount = 1 - ((1 - DLOC)*(1 - DLOM))