concurring.
I concur in the majority’s decision affirming the buyout order and punitive damages, and remanding for reconsideration of the valuation of the business and the purchase price of defendant’s share. I agree that the value of the business, and thus the value of Perle’s fifty percent interest, has been substantially understated. I write separately for two reasons. First, it is my view that the undervaluation has its source in but one mistaken exercise of discretion. That is the trial judge’s adoption of the thirty-five percent marketability discount espoused by plaintiffs expert, Hoberman. Second, I would not be understood to reject the application of a marketability discount to all cases of sole ownership of a close corporation, and I fear the majority’s opinion could be so read.
With respect to the scope of the remand, I start from the premise noted in Lavene v. Lavene, 148 N.J.Super. 267, 275, 372 A.2d 629 (App.Div.), certif. denied, 75 N.J. 28, 379 A2d 259 (1977), and recognized by the majority, that valuation of a close corporation is not an exact science.
The Regulations applicable when valuing closely held business interests are broad guidelines that assist an appraiser in forming an opinion of the value of the business interest. Opinions as to value frequently are far apart especially when such opinions are requested by adversaries. In the final analysis, the outcome of each case is usually a compromise, with the court often finding a value somewhere between the valuation sought by the taxpayer and the higher appraisal sought by the Service. Since the facts of each case will determine the outcome, it is worth noting that case law is usually available to support any position regarding valuation of an interest in a closely held business.
[Edwin T. Hood, et at, Valuation of Closely Held Business Interests, 65 UMKC Law Rev. 399, 437-41 (1997) (footnotes omitted).]
For that reason, our deference to the trial judge’s findings is particularly appropriate. Except for the marketability discount, virtually all of the challenged factors that entered into Hoberman’s valuation were subjects of credible though disputed evidence. Given the limited scope of our review, which the court notes, I would not disturb the trial judge’s findings with respect to the excess earnings approach of Rev. Rui. 68-609, 1968-2, C.B. 327; *35or the use of an 11% fair rate of return on tangible assets; or a 30% capitalization rate to reduce projected excess earnings to present value. These were adequately explained by Hoberman, and the trial judge was entitled to accept them. I would limit the remand to reconsideration of the excessive marketability discount.
With respect to application of a marketability discount in valuing a closely held business, most of the case law and legal literature relates to valuations undertaken for purposes of assessing tax upon a transfer of shares. E.g., James Edward Harris, Valuation of Closely Held Partnerships and Corporations: Recent Developments Concerning Minority Interest and Lack of Marketability Discounts, 42 Ark. L. Rev. 649 (1989); Edwin T. Hood, et al., Valuation of Closely Held Business Interests, 65 UMKC Law Rev. 399 (1997). Little has been written about the value of a close corporation in the circumstances of a court-ordered sale, particularly where a sale between the two fifty-percent shareholders will place 100% ownership in one of the two. The price to be paid should be one that either shareholder (assuming equal interest in 100% ownership) would consider fair, either as the buyer or the seller.
While I agree with the majority that the 35% marketability discount (literally a lack-of-marketability discount) was unjustified on these facts, marketability remains an appropriate factor when valuing a close corporation, including one whose shares are or will be wholly owned by one party.1 A lack-of-marketability discount recognizes the absence of a ready public market for the shares in a closely held corporation.
The discount for lack of marketability is based upon the logical premise that investors will not pay as much for stock or partnership interests which have fewer potential purchasers and are therefore less marketable than similar publicly traded interests.
*36[James Edward Harris, Valuation of Closely Held Partnerships and Corporations: Recent Developments Concerning Minority Interest and Lack of Marketability Discounts, 42 Ark. L.Rev. 649, 650 (1989).]
The marketability discount factor is distinct from a minority discount. The latter applies where the block being sold lacks control over significant corporate decisions, and not where one 50% shareholder is to buy out the other at a price to be determined by the court. Theoretically, marketability and minority discounts can overlap, because lack of liquidity is exacerbated when the sale of privately held shares cannot convey control.2
However, even a sale that will place 100% ownership in the buyer warrants consideration whether that buyer, should he wish to divest himself of the company in the future, will find a market at a price that fairly reflects what he is paying for half the company. If the proceeds on a sale of the privately-held business are likely to be reduced by a limited market, or by the cost of finding a market (e.g., a broker’s commission), it may be fair to reduce the valuation of the business on that account.
If, as my. colleagues suggest, the trial court is satisfied that the base valuation of the business has already taken into account a lack of liquidity, then it would be redundant to discount for lack of marketability by more than the transfer costs (including broker’s commission). I would simply caution against ignoring fair consideration of a marketability discount in valuing a closely held business.3 I therefore would not direct the trial court on remand to limit the marketability discount to a fair brokerage fee, although that result may turn out to be appropriate.
In our state courts, such valuation of a closely held business often arises in the context of equitable distribution.
Of course, if either 50% shareholder here were to seek an outside buyer for his shares, both the minority and marketability factors would undoubtedly affect the price.
For example, defendant’s expert, Ott, factored into his valuation a comparison to publicly traded shares of a similar business. That suggests that he did not account for illiquidity, and his valuation then should have been subject to some marketability discount.