What is Investment Value Anyway?

January 1, 2013

Price Driven by Purpose of the Appraisal, Professional Standards, Appraiser Overhead

The International Glossary of Business Valuation Terms defines Investment Value as “The value to a particular investor based on individual investment requirements or expectations.” The Guide to Business Valuation Glossary adds the phrase “...as distinguished from the concept of market value, which is impersonal and detached.”

The idea of investment value is that it is not based on a hypothetical purchaser who represents a composite of all purchasers for value, but instead on the value to a specified individual with a specified set of investment criteria and especially those with the potential for synergistic value. It arises mostly where the appraiser is asked to estimate the value of a business entity to a potential purchaser who is known and identified at the outset. This might be the value, perhaps, of shares in a target company to its acquirer, where the merger of the acquirer and the target together will result in a combined value greater than the sum of the individual values.

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