Is It Time to Part Ways?

It has been said that the only ship that does not float is a partnership. Sometimes in a partnership, the time comes when it is in the best interest for partners to go their separate ways. If you have a partner in a business and want to buy them out or be bought out, we can value partial interests in a business.

However, there are aspects to valuing partial interests that do not come into play when valuing the entire going concern. It is not always as simple as determining the value of the going concern and multiplying by the ownership interest. A minority or non-controlling interest brings another layer of complication to the analysis. 

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partner buy sell agreements

Limitations of Non-Controlling Interest

A non-controlling interest does not have the ability to do any of the following:

  1. Setting company policy and influencing the operations of the business
  2. Appointing management and determining management compensation and benefits
  3. Power to acquire and dispose of business assets
  4. Power to select vendors and suppliers
  5. Facilitating business reorganizations:
  6. Sell or acquire treasury shares
  7. Power to dictate dividend policy and payments
  8. Power to revise company organization documents
  9. Ability to establish or revise buy/sell documents
  10. Power to block any of the above



 

Valuing a Non-Controlling Interest

A discount for lack of control is an amount or percentage deducted from the subject pro rata share value of 100 percent of an equity interest to compensate for the lack of any or all powers afforded a control position in the subject entity such as those shown above. This is just one of the unique aspects of valuing a partial interest in a privately held company. 

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