Illiquid assets are often sold at a discount compared to comparable liquid assets when estimating value using multiples of revenues or cash flows or earnings. Studies show a 35% discount for illiquid assets (Maher 1976). Is that liquidity discount always appropriate?
No. Illiquidity discounts become irrelevant when the firm can be taken public, the position is relatively a small part of the entire portfolio of the buyer, the buyer has low levels of debt making it less likely to be forced to sell the asset in question, the asset has strong cash flows.