Do Controlling Interests Warrant a Lack of Control Discount?

BVResearch Pro
American Society of Appraisers Business Valuation Review™
Fall 2009 Volume 28, Issue 3 pp. 140-143
Gene A. Trevino, PhD, ASA
David P. Martin

Summary

The application of lack of control discounts to minority interests in closely held businesses is a generally accepted practice in the business valuation community. This paper challenges this practice by proffering reasons why controlling interests may warrant a discount for lack of control. In order to test the hypothesis that investors pay higher premiums for relatively higher levels of ownership, Mergerstat Control Premium data were analyzed. The authors found that buyers do pay relatively higher control premiums for controlling interests greater than 80%. This research provided support for the application of control discounts to controlling interests greater than 50% but less than 80%.
Do Controlling Interests Warrant a Lack of Control Discount?
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