Valuation of Private vs. Public Companies

Private company valuations are discounted based on several risk factors associated with private sector investment, which results in a marked difference between the valuation of a privately held company, subsidiary or a division and a publicly traded corporation. There is a number of distinctions between private and public companies that have an impact on the private company’s value. An accurate valuation of privately-owned companies largely depends on the availability and reliability of the private company’s historic financial information. Public company financial statements are officially audited, documented and overseen by a government regulator. Alternatively, private firms do not have government oversight unless operating in a regulated industry and usually audited financial statements are not required.