A minority shareholding is a parcel of shares in a company that cannot exert control over the company. This generally means they have little to no control over the day to day management of the company and the decisions made by its board of directors.
What is a minority shareholding valuation and how does it differ to business and company valuations?
The valuation of a minority shareholding is the process of assigning a value to a parcel of shares in a company that has a non-controlling interest in that company. It differs from a business valuation, which is a valuation of what is referred to as the business assets owned by a company or individual(s). It also differs from the valuation of a company, which is a process whereby 100% of the shares in a company are valued.
What matters require the production of a minority shareholding valuation?
Minority shareholding valuations are often required for a range of requirements including
- Family law matters;
- Employee share scheme matters, and;
- Sale and purchase of share matters.
What must a valuer consider when undertaking a minority shareholding valuation?
When undertaking a minority shareholding valuation, the valuer needs to begin by understanding the activities of the company, gauging the company’s current and historical performance and assessing other risk factors inherent in the operations of the company. This is done through the review of items such as:
- The financial statements of the company;
- Key contracts held by the company;
- The value and condition of physical assets held by the company;
- Key risks associated with the industry in which the company operates in, and;
- Broad economic risks which may impact the company’s performance.
From here, the major considerations that have an impact on the value of a minority shareholdings need to be assessed by the valuer. These factors include the level of control held by the shareholding, income earned by the shareholding (i.e. dividends) and restrictions relating to when and to whom the shares can be sold.
Contact Us Today
Quinn M&A’s team of valuation experts can assist you with valuing minority shareholdings. As Certified Minority Interest Valuers, we are experts in this field. Further, we are willing and able to provide evidence as expert witnesses for these matters. Call us on 02 9223 9166 or submit an online enquiry for a confidential discussion.