Background Note | HBS Case Collection | February 2001 (Revised April 2001)

Note on Valuing Private Businesses

by Dwight B. Crane and Indra Reinbergs

Abstract

This case provides a brief overview of valuation for owners of closely held companies. The focus is on a comparable transactions approach, although rules of thumb and discounted cash flow are mentioned. Earnings multiples and their drivers are discussed. It uses company example and transaction data on private deals as an exercise in screening for comparable companies and valuation based on multiples. It includes a three-page bibliography with references to further sources on valuation methods, private transaction data, financial databases for company screening, and professional advisors from appraisal and valuation communities.

Keywords: Earnings Management; Finance; Cash Flow; Data and Data Sets; Private Ownership; Valuation;

Citation:

Crane, Dwight B., and Indra Reinbergs. "Note on Valuing Private Businesses." Harvard Business School Background Note 201-060, February 2001. (Revised April 2001.)