What is a typical discount for lack of control?
James Williams
Published Mar 21, 2026
DLOCs alone commonly reduce the value of the transferred interest by 5% to 15%. All else being equal, a non-controlling ownership position is less desirable (valuable) than a controlling position.
How do you calculate discount for lack of marketability?
The discount for lack of marketability calculation can be based on three different approaches.
- The first approach uses the price of restricted shares.
- The second approach estimates the DLOM using the price of a put option divided by the stock price, where the put option used is ATM (at the money).
How do you use lack of control discount?
The Discount for Lack Of Control (DLOC) is a discount that must be applied to the share price when the investor wishes to value a position in a company in which he or she will not have a controlling interest.
What are valuation discounts?
A valuation discount refers to the deficiency in value that a buyer estimates for a company compared to its peers in the same industry. Buyers will typically review comparable transactions as part of their due diligence prior to completing an acquisition.
What is a minority interest discount?
A minority discount is an economic concept reflecting the notion that a partial ownership interest may be worth less than its proportional share of the total business. The concept applies to equities with voting power because the size of voting position provides additional benefits or drawbacks.
How much is a minority discount?
In a notional valuation context, minority discounts are usually in the range of 10% to 40%. If a seller is motivated to sell, the purchaser may be able to negotiate a higher discount. If the purchaser is motivated to buy, the seller may be able to negotiate a lower discount.
How do you calculate minority discount?
The minority interest discount calculated from the 40% control premium in our example above is 28.6% [1 – (1/(1+0.40))]. The averages of control premium studies tended to be in the 35% to 40% (or more) range, so implied minority interest discounts tended to be in the range of 25% to 30% or so.
What does a low discount rate mean?
Similarly, a lower discount rate leads to a higher present value. This implies that when the discount rate is higher, money in the future will be “worth less”, or have lower purchasing power than dollars do today.
