Valuation of Entities with Cross-Shareholding Ownerships

This article discusses the methodology and basis of valuing entities with cross shareholding ownership structures. The key issue in solving the problem of valuing a company with a cross shareholding structure is to establish a “pure value.” The pure value of an entity is defined as the value of an entity excluding the value resulting from ownership in other entities belonging to the group of entities with cross-shareholding structures. The author proposes a set of linear equations to help in solving this task. In addition, the author proposes certain adjustments to the equations to take into account issues such as a lack of marketability, minority stake positions and provision for tax gains or losses. A general model for n entities is attached at the end of the article.