The Value of Control: Control Premiums, Minority Interest Discounts, and the Fair Market Value Standard

Abstract

Control premiums represent the value that can be extracted by controlling shareholders at the expense of minority interests. To assume that controlling shareholders can extract enough value from the minority interests to justify the high premiums suggested by acquisition premium studies is to assume a level of unethical and illegal behavior that is not tolerated by U.S. regulators or shareholders and is not supported by the empirical evidence.

Keywords: control, control premium, controlling interest, premium for controlling interest, value of control, minority interest, minority interest discount, discount for minority interest, private benefits of control, ESOP, business valuation, acquisition premium, majority interest

JEL Classification: G00, G30, G32, G34, H20, H32