Excess Corporate CashExcess Corporate Cash

Gregory A. Barber

Logic dictates that valuation experts assume that cash is worth its face value in majority interest or control scenarios. And that assumption makes sense: In such instances, control of a company provides access to and control over the assets, including cash.

But experts fail to see that in minority interest valuations for both private and public companies, a different perspective is required — particularly when excess cash is held within a private operating business.

There are many reasons why excess cash in minority interest valuations should be evaluated carefully and valued separately from a company's operations. Imagine, for example, that a company has entrenched management and poor investment opportunities; clearly, i...