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Doscounts and premiums in business valuation and theoretical model of control premium
Rýdlová, Barbora ; Mařík, Miloš (advisor) ; Marek, Petr (referee) ; Kráľovič, Jozef (referee)
The dissertation thesis deals with discounts and premiums in business valuation, especially lack of marketability discount and control premium (minority discount). There are no complex theoretical publications concerning these topics in the Czech Republic. Abroad, the publications are mostly descriptions and results of empirical studies originated in U.S. markets. These empirical studies usually deal with a single or a few aspects of a discount or premium. There are still some blank areas in the discounts and premiums theory even abroad, such as the sources of control premium, relationship between the levels of value and standards of value, the relation between the value of a company as a whole and the value at the level of shareholders. I develop a theoretical model of control premium, in the dissertation, which is trying to fill-in these blank areas and thus help practitioners to deal with the control premium or minority discount in a correct way. Moreover the model shows how protection of minority shareholders in general and especially during acquisitions influences the magnitude of control premium. It also shows that the magnitude of control premium depends on the market competition structure. If the competition is perfect (as we can suppose it would be at financial markets for minority interests) or there is a strong oligopsonistic competition the subjects of transaction are not able to influence the price, whereas for monopsonic structure (as it usually is in the M&A market in the Czech Republic) the subjects can influence the price. For monopsonic structure at the M&A market I conclude it is impossible to estimate the value of transaction as a point estimate since it will depend on nonfinancial factors what the price of transaction will be. We can only estimate the upper and lower boundary of interval the final price of transaction will lie within. The boundaries are the maximum price for the acquirer and minimum price for the seller in the sense of German Köln School. The dissertation also tests the possibility and theoretical correctness of using the results of foreign empirical studies of discounts and premiums for valuing businesses in the CR. We analyze the methodology and synthetize the problems connected with application of results of various studies. I conclude that it is impossible to use the results directly in the conditions of the CR. I suggest there should be a deeper analysis done and factors that influence the magnitude analyzed and considered. We should not rely just on averages. The thesis also contains an empirical part testing the magnitude of the lack of marketability discount in the Czech Republic.
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