Microsoft Word peachtree case study
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| 2.6.1 Control Premiums The application of some appraisal methods results in anon controlling indication of value. In the case where the subject being appraised is fora non‐controlling interest (sometimes referred to as a minority interest) there will be no adjustment required. However, when the appraisal methods result in anon controlling indication of value and the subject interest is fora control interest, a control premium should be considered by the valuator. Page 24 of 141 A controlling interest in a company is perceived as more valuable than anon controlling interest because the non‐controlling interest generally has less control over the policy setting, strategic direction and operational aspects of the company. An investor will generally pay more (i.e., a premium) for the rights (or abilities) afforded a controlling interest. The following list is not all‐Inclusive; however, it does provide the basis for consideration as to assessing the size of a control premium, if warranted. An investor with a controlling interest has the ability, among others, to • Appoint management • Appoint or change members of the board of directors • Determine management compensation and perquisites • Set operational and strategic policy and change the course of the business • Acquire, lease, or liquidate business assets • Select suppliers, vendors and subcontractors to do business with • Negotiate and consummate mergers and acquisitions • Liquidate, dissolve, sellout, or recapitalize the company • Sell or acquire treasury shares • Register the company’s debt/equity for an initial or secondary public offering • Declare and pay cash/stock dividends • Change the articles of Incorporation or bylaws of the company • Select joint venture partners or enter into such agreements • Decide product/service offerings, pricing, and markets to serve/not serve • Enter into license or technology sharing agreements regarding intellectual property Page 25 of 141 • Block any (or all) of the above actions 7 A control premium has also been defined as the additional consideration that an investor would pay over a marketable minority equity value (the Wall Street Journal price) in order to own a controlling interest in the common stock of the company Many different studies have been completed which examine actual premiums paid. One of the more common sources of control premium data is the Mergerstat Review which uses publicly‐traded companies public price five days before a takeover announcement is made public. Control premiums measured in this way (and across real transactions, i.e., actual prices paid for particular interests) typically include other factors other than pure control‐related factors such as strategic effect and anticipated synergies from the planned business combination. Emphasis must also be placed on the factors affecting the magnitude of a given control premium fora specific subject interest. These factors Include, but are not limited to Download 0.84 Mb. Share with your friends:
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