What would you pay to be in charge? The evolving state of control premiums

Description

Abstract: Investors theoretically pay a premium to control a business. “Control premiums” are intended to measure what control really is worth to investors. But quantifying these premiums can be problematic — in fact, the Appraisal Practices Board (APB) has identified control premiums among the top four areas in which it observes the “greatest diversity” in appraisal practice. It recently released a discussion draft that addresses the issue in the context of valuations prepared for financial reporting purposes. This article looks at its recommendations, while noting that traditional control premium studies still have their place. A sidebar discusses discounts for lack of control.