Why are minority interests less valuable than controlling interests?
A controlling interest in a company is generally more valuable than a non-controlling interest because the controlling interest holder can control policy setting, dividends, compensation, investment in and disposition of assets, strategic direction and operational aspects of the company. An investor will generally pay more for the rights, liberties and benefits afforded a controlling interest, versus a non-controlling interest. The IRS, valuation professionals and the courts recognize the appropriateness of Discounts for Lack of Control (DLOC). A DLOC is an amount or percentage deducted from the pro rata share of value of one hundred percent (100%) of an equity interest in a business to reflect the absence of some or all of the powers of control.
A controlling interest in a company is generally more valuable than a non-controlling interest because the controlling interest holder can control policy setting, payment of dividends, compensation, investment in and disposition of assets, strategic direction and operational aspects of the company. Investors generally pay more for the rights, liberties and benefits afforded a controlling interest, versus a non-controlling interest. The IRS, valuation professionals and the courts recognize the appropriateness of Discounts for Lack of Control (DLOC). A DLOC is a percentage deducted from the pro rata share of value of one hundred percent (100%) of an equity interest in a business to reflect the absence of some or all of the powers of control.
