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Private Capital Markets: Valuation, Capitalization, and Transfer of Private Business Interests

Robert T. Slee · Second edition, 2011 · Wiley

Valuation & diligenceStructure & financingPreparing to sellOwners and advisers who want the theory under private-company pricing
Why it is on the shelf. The standard scholarly treatment of how private-company value, capital and transfer actually work, and the antidote to importing public-market intuitions into a private deal.

The Institute's reading

Slee’s central contribution is the idea of value worlds: a private company does not have one value but several defensible ones at once, depending on the purpose of the valuation and the buyer in question, and the transfer channel chosen, family, management, ESOP, financial buyer, strategic, largely determines which world governs. Around that he builds a serious treatment of private cost of capital and of why middle-market returns and pricing behave unlike public markets.

The Institute’s reading: this is the book that explains why the question what is my company worth is genuinely ill-posed until to whom and for what purpose are attached, which is also why this Institute’s concierge refuses to answer it with a number. It is a textbook, dense and occasionally dated in its data, read for the framework rather than the figures.

Key propositions

  • Value is purpose-dependent and buyer-dependent: different value worlds produce different, equally defensible numbers.
  • Private capital has its own cost structure; public-market discount rates mislead.
  • The choice of transfer channel is a value decision, not an administrative one.

In practice

  • Sellers comparing a strategic offer, a PE offer and a management buyout are comparing value worlds, not just prices.
  • Buyers should identify which world a seller’s expectation was formed in before negotiating against it.
Acquisition Conciergeorientation · not legal, tax or valuation advice
Happy to dig into it. What would you like to pressure-test from Private Capital Markets: Valuation, Capitalization, and Transfer of Private Business Interests: one of its propositions, how it applies to your situation, or where it disagrees with the rest of the shelf?