Given that the tax authorities are paying ever closer attention to the terms and conditions under which management packages are awarded, particular attention should be paid to the methods used to determine the volatility parameter, to which the valuation is particularly sensitive.
This parameter is generally defined by analogy with the volatility observed in comparable listed companies.
This analysis can be usefully supplemented by an intrinsic approach based on the historical and forward-looking financial data available to investors at the time the management package was established. A Monte Carlo simulation can then be used to deduce the volatility implicitly perceived by management and investors.
By Teddy Guérineau, Thomas Hachette, Romain Lortat-Jacob and Maurice Nussenbaum
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