Discounts and Premiums

Business valuation experts must consider discounts and premiums that affect the value of a partial business interest and determine whether or not it is appropriate to apply them. The primary discounts and premiums are:

  • Discount for lack of marketability: This reduces the value of interests that cannot be quickly or easily converted into cash. For an in-depth article on this topic, please see “The Controversy over the Discount for Lack of Marketability.”
  • Discount for lack of control: This discount reduces the value of interests that do not provide the owner with prerogatives of control.
  • Control premium: When appropriate, this premium is applied to recognize the enhanced value associated with a controlling interest.
  • Other discounts: Occasionally, discounts such as key person, portfolio, and blockage are relevant.

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