Sellers and employee owners need to understand why these discounts apply and how different appraisers evaluate them.
Minority Discounts Probably the most controversial discount is for a lack of control.
Control allows a buyer to take additional salary or perquisites, sell off pieces of a company or use the assets to buy other operations, and make decisions about business strategy, among other things. When a public company is the target of a takeover, the run-up in price that usually results is simply a buyer offering a control premium over the discounted minority price investors have previously paid. On a stock market, the mechanism for determining the premium is the market itself. The premium is worth what people will pay for it. In private companies, the issue is much more complicated.