How do you value a private company?

You use the same methodologies as with public companies: public company comparables, precedent transactions, and DCF. But there are some differences:

• You might apply a 10-15% (or more) discount to the public company comparable multiples because the private company you’re valuing is not as “liquid” as the public comps.

• You can’t use a premiums analysis or future share price analysis because a private company doesn’t have a share price.

• Your valuation shows the Enterprise Value for the company as opposed to the implied per-share price as with public companies.

• A DCF gets tricky because a private company doesn’t have a market capitalization or Beta – you would probably just estimate WACC based on the public comps’ WACC rather than trying to calculate it.