- A holding period imposes a liquidity restriction on the marketability of a block of shareholding in a business and as a result triggers a discount for lack of marketability.
TRUE FALSE
In some instances in the selling of shares in privately held businesses, buyers are restricted in the ability to sell the shares for a period known as the holding period. As a result of the inability to sell the shares during the holding period, buyers impose a penalty; a discount, before buying such shares to compensate for the liquidity restriction during the holding period. The answer is TRUE.
- A minority interest in a business triggers an all-inclusive non-marketability discount for which reason there will be no need to impose other discounts to further reduce the price of the interest.
TRUE FALSE
In business valuation analysis, minority interest typically attract discounts because of the disadvantages of non-marketability. However, the risks and discounts associated with minority interests are layered and not one off all-inclusive discounts. Depending on how small the minority is, it may trigger a further discount for, for example, lack of control which is over and above the lack of marketability discount to compensate buyers for the additional disadvantages associated with the size of the minority being considered. The answer is FALSE.
