Page 41 - Business Valuation for Estates & Gift Taxes

The Factset Mergerstat/BVR Control Premium Study, an online searchable database, provides more in-
depth data on individual transactions. The Control Premium Study data is available online, allowing a
detailed analysis of the transactions, thereby allowing the appraiser to develop a list of specific transac-
tions more relevant to the company being valued. To the extent the data is available, the information can
be analyzed by SIC code, size, industry, or other selected criteria.

One item to note is the difference between the ways in which the two studies treat transactions that oc-
curred below their pre-merger public market trading prices—that is, those that reflected a "negative
premium." The Factset Mergerstat/BVR Control Premium Study allows for the inclusion of negative
premiums while the Factset Mergerstat Review excludes negative premiums when calculating average
and median premiums.

Another difference between the two resources is the pre-acquisition announcement price used in their
calculations. The Control Premium Study calculates the control premium using prices from five different
dates prior to the acquisition and also uses a stock price it believes is unaffected by news of the acquisi-
tion transaction. Mergerstat Review uses a price five days before the transaction announcement.

Conclusion

Considerations regarding control will likely be part of every valuation engagement and resulting report.
Therefore, it is critical that the valuation analyst know how to identify, calculate, and incorporate control
premiums and lack of control discounts on each engagement. The ramifications to the client and ulti-
mately the valuation analyst for not preparing a well thought-out and supportable valuation could result
in added time, expense, and frustration for all parties.

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