The Impact of Recession on the Business Valuations of Privately Held Companies: An Empirical Analysis

• In Event: Forensic and Investigative Accounting 1

Abstract

This paper examines how the recent recession (2007-2009) impacted the sales values of privately held companies in the United States. We used Pratt’s Stat Private Company Merger and Acquisition Database to compare the decrease in values of privately held companies to publicly traded companies. In addition, we compared which industries are most affected by a recession in terms of a company’s sales value (i.e., acquisition price). We included 4,482 sales transactions of privately held companies in our dataset. The results show that private companies’ values (59.8%) decreased to a larger extent than large publicly traded companies listed on the S&P 500 (21.2%) during the recession. As expected, the sales values of privately held companies significantly decreased in six of the seven examined industries during the recession. However, we did not anticipate the finding that the sales values in the “Construction” industry did not decrease.

Authors

• Lasse Mertins, Towson University

• Charles J Russo, Towson University

• Charles Leonard Martin, Towson University