A valuation is not just a number for the accounts. It is only useful if it is credible.
Private company share valuations are rarely straightforward. Unlike listed shares, there is no daily market price. In many cases there is no recent transaction at all, which means there is no clear benchmark to rely on.
But you still need to value them.
Unquoted shareholdings often arise through subsidiaries, joint ventures, minority stakes and strategic investments. They tend to be long-term, bespoke, and rarely traded. That makes valuation harder, but it also makes it more important to get right, including at year-end.
IFRS 13 defines fair value as the price that would be received to sell an asset in an orderly transaction between market participants at the measurement date. In plain terms, fair value is not what you paid and it is not what you hope it becomes. It is what a rational third party would pay today.
That is why unquoted valuations typically fall into Level 3 of the fair value hierarchy. Inputs are unobservable, judgement matters, and assumptions need to be evidenced and defensible.
There is no single method that works in every case. Asset-based approaches can be appropriate for asset-heavy businesses, but they often understate value where performance is driven by cash generation rather than balance sheet assets. Market multiples can help as a sense-check, but only if comparability is real.
For many private companies, discounted cash flow (DCF) is the most robust primary method. The valuation is then driven by the quality of the forecast and, crucially, the discount rate. Weighted Average Cost of Capital (WACC) is not a plug-in number. If you cannot explain it, you cannot defend the valuation.
Regulators are also raising expectations. In its review of private market valuation practices, the Financial Conduct Authority (FCA) highlighted that robust approaches demonstrate independence, expertise, transparency and consistency.
Arlingclose provides specialist support in valuing unquoted shareholdings for financial reporting, governance and strategic decision-making. If you need an audit-ready year-end valuation, or an ad hoc valuation to support a strategic decision, contact treasury@arlingclose.com.
21/01/2026
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