Control Premium
A control premium is the additional value that a buyer is willing to pay to acquire a controlling interest in a company. This premium reflects the benefits of gaining control, such as the ability to make strategic decisions, influence management, and restructure operations. The size of the control premium varies depending on factors such as the target company's financial performance, potential synergies, and the buyer’s strategic objectives.
Example
A company acquiring 51% of another firm may offer a price above the current market value of its shares to secure control of decision-making, paying a control premium for the acquisition.
Key points
• A control premium is the extra amount paid to acquire a controlling interest in a company.
• It reflects the value of gaining control over decision-making and operations.
• The size of the premium depends on factors like financial performance, synergies, and strategic benefits.
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