Control Value In The Privately Owned Firm

run across value in the privately owned menage: building the case for the evaluate authorities

S.M.C. Voesten MSc.
Master in blood line Valuation Program
TiasNimbas Business School
Warandelaan 2
5037 AB Tilburg
Telephone: 013 466 86 00
fax: 013 466 86 99
information@tiasnimbas.edu
sander.voesten@gmail.com

September 30th, 2009

Abstract
In current literature, a lot of different views and approaches ar displayed when determining the appropriateness and direct of valuation discounts like the discount for lack of control of a minority shareholder, or the discount for their lack of commercialiseability. This paper examines this proceeds in light of the possible dispute between revenue enhancement payers and tax authorities about these discounts in valuating minority shares in a private company. The subject of minority discounts is looked upon from different approaches, creation theoretical, market based, behavioral based, option based or hardheaded based.



In answering the questions whether or not discounts exist, are they reliable and if so, how are they to be valued, we conclude that discounts do exist and are accepted by tax authorities, but that there is no single coherent approach to the subject and many disagreeing factors among researchers, so that the use of discounts in valuations of private share blocks has to be defended by analyses of the companies to be valued, which differ in every single case. Control value and thus minority discounts depend on factors such as the division of shares, the legal environment, the cultural environment, management factors, market determinants and the relationship of control and marketability. In building the case for the tax authorities, a complete analysis of the firm and its environment must(prenominal) be undertaken and described, and the appropriate factors that positively correlate with the existence and size of discounts should be stressed.

1. Introduction
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