Time to rethink the control premium

BVWireIssue #188-1
May 2, 2018

discounts & premiums
ASA, control premium, fair value, fair value measurements, the appraisal foundation (TAF)

When you use the guideline public company method, do you always apply a control premium? You may want to reconsider because recent guidance has challenged this practice. You can’t automatically assume that premiums paid in prior transactions give an indication as to a premium for control that may apply to your subject business. Therefore, appraisers must be careful when simply relying on historical data regarding premiums paid to determine a control premium. The guidance is contained in The Appraisal Foundation’s Valuation for Financial Reporting (VFR) Valuation Advisory #3, The Measurement and Application of Market Participant Acquisition Premiums. A very timely session at the upcoming ASA/USC 13th Annual Fair Value Conference in Los Angeles on May 10 will include a discussion of best practices for measuring enterprise value and minority interest given this new framework. The ASA has announced that this event is sold out for in-person registration. But you can still attend—thanks to BVR, which will broadcast a live streaming webcast of the full event.
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