Business Valuation: Premiums and Discounts in International Professional Practice

The valuation of a (nontotalitarian) shareholding in the capital stock is characterized by some critical conditions, which are mainly related to the fact that the transfer or acquisition of the same may determine the transfer of control from one subject to another. It follows that the value of the shareholding may not simply be equal to the pro rata value of the business capital, but rather its valuation has to take into consideration the features, peculiarities, and effects, which are inherent to the typology of the shareholding to be transferred. Discounts and premiums do not just affect the value of a company; they play a crucial role in influencing a host of other factors and conditions that can make or break a deal. When it comes to business valuations, it is the business appraiser’s responsibility to be intimately knowledgeable with every aspect of discounts and premiums: the different types, the situations when they may or may not apply, and how to quantify them. The paper aims to examine if the Italian professional practice adopts premiums and discounts, when to value the company, and how to quantify them.