Majority and Minority Shareholders:
Control Premiums, Minority Discounts,
and Lack of Marketability Discounts
Philip Saunders Associates (PSA) values minority and controlling ownership interests, including estimating minority discounts, lack of marketability discounts, and control premiums. PSA provides consultation and valuation services in stockholder disputes, where minority freeze-out is alleged, or where a minority or majority shareholding in a privately held company must be valued for buyout, estate or gift tax, divorce, or other purposes.
- For minority shareholder making gift of stock in software company with $300,000,000 valuation, PSA estimated minority and marketability discounts. PSA analyzed company, capitalization, ownership distribution, stockholder agreements, and publicly available data on marketability discounts. PSA determined appropriate discount for particular stock of client to be approximately 60%.
- For stockholder with controlling interest in real estate LLC's, PSA estimated discounts applicable to holdings of minority stockholder to estimate fair market value. PSA's detailed analysis of relative rights and powers of parties and of pricing of comparable minority interests in marketplace indicated combined minority and marketability discounts for the two LLC's of 83% and 89%.
- For minority stockholder in restaurant chain alleging freeze-out from share in expansion restaurants, PSA analyzed inter-corporate relationships, identified sources of funds for expansion, and valued new restaurants. PSA report contributed to settlement which, in words of client attorney, was "as good as we would have gotten in trial, if everything went our way."