Marketability Discount Applicable to Interest in Family Business

South Carolina divorce case summary on business valuation and minority discounts.

Clark v. Clark

Family court could determine that marketability discount was applicable to wife’s 25% interest in closely held family business, as part of determining an equitable distribution in divorce case; both husband’s and wife’s experts initially applied a marketability discount, with wife’s expert only later backpedaling at the direction of her counsel, expert testimony demonstrated the business could be sold fairly readily, husband’s expert thoroughly explained her valuations and her reasons for applying the discount, including that the corporation was a privately held business, making it less marketable and less liquid that a publicly traded counterpart, while wife’s expert, who based his opinions on a comparative sales analysis, did not explain the size, scope, and lines of manufacturing of comparative businesses.

A lack of control discount was also reasonable, even though husband would have owned 100% of the company after apportionment, because a holder of wife’s 25% interest would have no control over the company, and because any buyer of a minority interest would have been at the whim of the majority, it would have been difficult to find a buyer willing to pay a proportionate amount.

Opinion No. 27969
(South Carolina Supreme Court, May 13, 2020)

See original opinion for exact language.  Legal citations omitted.

To learn more, see Business Valuation in Tennessee Divorce.