It is not uncommon in private company and acquisition valuations to see large premiums attached to estimated value to reflect the “value of control.” But what, if any, is the value of control in a firm, and, if it exists, how do we go about estimating it?

In this paper, we argue that the value of controlling a firm has to lie in being able to run it differently (and better). Consequently, the value of control will be greater for poorly managed firms than well-run ones. The value of control has wide ranging implications beyond acquisitions. In this article, we will show that the expected likelihood of control changing is built into the price of every publicly traded company and that this likelihood provides a way of measuring the payoff to strong corporate governance. We will also argue that getting a better handle on the value of control can allow us to better explain the differences between voting and nonvoting share prices and the minority discount in private company valuations. pdf