COREVALUATION​

The Strategic Role of Control in Security Valuation

In the landscape of private wealth and alternative investments, the value of an ownership stake is not merely a pro-rata calculation of its underlying assets. It is a reflection of the bundle of rights that interest possesses. At Core Valuation, we distinguish between simple ownership and the functional power to direct capital—a distinction that is critical for defensible estate and gift tax planning.

The "Control Premium" vs. The Reality of the Minority Stake

Fair market value is predicated on the actions of a "hypothetical willing buyer." In any competitive market, a buyer will pay a premium for the authority to manage operations, influence strategic business decisions, and—most importantly—direct cash flows.

Conversely, an interest that lacks these rights is fundamentally less valuable to a rational investor. This "Discount for Lack of Control" (DLOC) is not just a tax-saving mechanism; it is an economic reality driven by the heightened risk profile and diminished agency of a non-controlling position.

Quantifying the Impact: Beyond "Rules of Thumb"

Many generalist appraisers apply standardized discounts that rarely withstand the scrutiny of a specialized IRS audit or aggressive litigation. Our approach is forensic and fact-specific, focusing on the specific "lost powers" of a minority holder:

Compensation and Perquisites: The inability to set officer salaries or bonuses.
Capital Allocation: No authority to authorize distributions or reinvestment.
Operational Governance: The lack of power to admit new members, amend governing documents, or elect directors.
Liquidity and Exit: The inability to compel a sale, merger, or liquidation of the entity.

Our Methodology: Court-Tested and Data-Driven

At Core Valuation, we move beyond generic studies. We perform a multi-layered analysis that includes:
Rigorous Document Review: Deep analysis of Operating Agreements, Bylaws, and Shareholder Agreements to identify specific restrictive covenants.
Market-Derived Data: Utilizing empirical data from public company acquisitions and private placement studies to benchmark control premiums.
State Law Specifics: Evaluating how state-specific "supermajority" statutes or minority-owner protections affect the "swing vote" potential or blocking power of an interest.

By grounding our conclusions in documented market evidence and historical management actions, we provide a valuation that is both economically sound and highly defensible for HNW families and their legal counsel.