What is the "bottom up" approach used for in minority interest valuations?

The "bottom up" approach in minority interest valuations focuses on assessing the underlying value of the individual assets of a business before considering control premiums. This method typically begins by evaluating the specific assets and financial performance of a business, allowing appraisers to ascertain a value based on a detailed analysis of those components—essentially starting from the ground level.

In the context of minority interest valuations, using this approach implies that when valuing shares that do not confer control, appraisers might assess the value of the business's assets before determining how a minority stake would be valued in comparison to a controlling interest. As a result, premiums for control interest valuations are added afterward to reflect the higher value that comes from having control over the company, which is crucial for accurately valuing minority interests that do not include such control. This method ensures that the starting point of the valuation is grounded in the actual worth of the business's assets and operations.

In contrast, approaches focused on starting from a control value or estimating liquidation value do not align with the bottom-up method, as they take a different perspective on valuation, making them less suitable for a minority interest evaluation. Evaluating investment potential is also outside the specific framework and intent of minority interest valuations strictly from the perspective of