Hi, I had come across the application of control premium in valuation method ie.control premium only applied in market multiples valuation but not in DCF model. Appreciate if anyone could advise the reason on this. Thanks!
I have a piece of asset that I want to sell, after you do your DCF, you determined that the “fair” price is $100; then you add/subtract other qualitative pricing factors. For example:
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There is no active market for this asset, I need to take a 5% illiquid discount, I will pay you $95
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The asset gives me controlling stake in the company, it needs to add on a 10% control premium, I will pay you $110.