Gift, Estate, & Income Tax Compliance
2021 01 Value Matters

April 1, 2020

Mercer Capital’s Value Matters® 2020-04

The 1991 Silber Study of Restricted Stock Discounts

We Should Have Known Then

Excerpted from www.ChrisMercer.net Blog

By the time I came into the business valuation profession, appraisers recited a small number of restricted stock studies to conclude that typical discounts were in the range of 25% to 45%, and therefore, that marketability discounts for illiquid minority interests of private companies should be in that range, as well.

But Professor William L. Silber wrote an article in the respected Financial Analysts Journal that told a different story.1  However, business appraisers ignored wisdom found in the Silber Study and only took its conclusion that the average discount in the study was 34% as confirming of the existing lore.

Summary statistics from the Silber Study are provided in Exhibit 8.4 of our forthcoming book, Business Valuation: An Integrated Theory, Third Edition (Mercer & Harms, Wiley 2020), which is available for purchase on Amazon.com. Exhibit 8.4 is reproduced on page 3 of this newsletter.

But wait, there’s more.  Professor Silber looked at his sample of 69 restricted stock discounts and noticed a distinct difference between the companies that had lower discounts (less than 35%) and higher discounts (greater than 35%).  The study provided additional color as found in Exhibit 8.5 (on page 3 of this newsletter).

What a difference a more informed look makes.  The average for transactions with discounts exceeding 35% was 54%, while the average for transactions with discounts less than 35% was 14%.  What could have caused this difference?  Professor Silber provided summary statistics for the two subgroups.  Simply put, the companies with lower discounts were just more attractive in terms of cash flow, perceived risk, and likely expected growth than the companies with higher discounts.  They were larger in terms of revenue and market capitalization and more profitable than the companies in the larger discount sample.

A picture is helpful.  I wrote about the Silber Study in Quantifying Marketability Discounts (which introduced the QMDM) in 1997 and provided a chart similar to Exhibit 8.6 from the new book (on page 3 of this newsletter).

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Mercer Capital to Attend and Speak at the 38th Annual ABA RPTE National CLE Conference
Mercer Capital to Attend and Speak at the 38th Annual ABA RPTE National CLE Conference
Mercer Capital will attend and participate in the 38th Annual American Bar Association Real Property, Trust and Estate (RPTE) National CLE Conference, held April 29–May 1, 2026, in Chicago, IL, at the Loews Hotel. Travis Harms and Tim Bronza will represent the firm, with Harms also participating as a speaker.The RPTE National CLE Conference is one of the ABA’s flagship gatherings for real property and estate planning professionals, bringing together attorneys and advisors for several days of in-person education and discussion. Topics this year range from estate and gift tax planning and charitable strategies involving closely held businesses to real estate transactions and fiduciary considerations, with an emphasis on practical takeaways for day-to-day practice.Harms will serve as a panelist on the session “Fair (Market) Warning: This is Not a Final Determination – Practical Advice from Tax Litigators."Travis Harms is President of Mercer Capital and leads the firm’s Family Business Advisory Services Group. He works with multi-generation family businesses on valuation, financial education, and strategic planning, helping families align ownership structures and long-term objectives.Tim Bronza is Managing Director of Mercer Capital’s Florida office. He has extensive experience valuing business interests for federal gift, estate, and income tax purposes and works with clients and their advisors on complex valuation matters across a range of contexts.Mercer Capital regularly supports attorneys and fiduciaries in these areas through independent valuation and financial advisory services. The firm’s work includes analyses prepared for gift and estate tax planning, succession planning, and dispute resolution, with an emphasis on producing clear, well-supported conclusions that can be used in both planning and adversarial settings.Mercer Capital looks forward to participating in this year’s conference. To learn more about the RPTE conference, visit the event’s website: https://rptecleconference.com/.
April 2026 | Valuation Date Discipline
Value Matters® April 2026

Valuation Date Discipline

In estate and gift tax related business valuation, few inputs are as consequential, and as frequently underestimated, as the valuation date. While the concept appears straightforward, the practical implications are anything but. The valuation date determines the universe of information available to the appraiser, frames the applicable standard of value, and anchors the conclusion in a specific economic, industry, and subject company context.
Mercer Capital to Sponsor The 32nd Annual Advanced Estate Planning Strategies Course
Mercer Capital to Sponsor The 32nd Annual Advanced Estate Planning Strategies Course
Mercer Capital is proud to sponsor the 32nd Annual Advanced Estate Planning Strategies course, a live, in-person CLE event held April 23-24, 2026, at the St. Julien Hotel & Spa in Boulder, Colorado. Representing the firm at the event are J. David Smith, CFA, ASA, and Barbara Walters Price.Presented by TexasBarCLE and cosponsored by the Real Estate, Probate & Trust Law Section of the State Bar of Texas, the course brings together attorneys and advisors for two days of in-depth discussion on advanced estate planning topics. The program features sessions addressing retirement benefits planning under SECURE 2.0, life insurance strategies, multijurisdictional planning considerations, and approaches to minimizing conflict in estate and trust administration.Attorneys attending the course will be focused on navigating increasingly technical planning issues, from evolving transfer tax rules to the practical challenges of administering complex estates. Mercer Capital regularly supports these efforts through valuation analyses used in estate and gift tax planning, charitable giving, and ownership transitions, helping clients and their advisors make informed decisions in high-stakes situations.J. David Smith is a Senior Vice President at Mercer Capital with more than 25 years of experience in business valuation. He provides valuation services for tax planning, transactional purposes, and financial reporting with particular experience in industries including financial services, oil and gas, and biotechnology.Barbara Walters Price serves as Chief Marketing Officer of Mercer Capital and is a member of the firm’s Board of Directors. She leads the firm’s marketing strategy and oversees corporate communications, business development, digital strategy, and thought leadership initiatives.Mercer Capital looks forward to connecting with attendees and contributing to the discussions at this year’s event. To learn more about this in-person CLE course, visit TexasBarCLE’s website: https://www.TexasBarCLE.com/new/?TransferTo=L23823.

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