The question says : the company commands a control premium of X. And we are given the EV/EBITDA multiple for market, and the EBITDA for the company itself.
In the answer, we should not add the control premium !
My question is when should we add the premium ? If we add it, should we add it to the equity portion only ?
Example we find MVIC - Debt = Equity => Then Equity * (1+control premium).
So if we use the GTM method, even if the item set says that the company commands a control premium, we should not add the premium ?
There is also an example (5) in the curriculum for the GPCM where the control premium has not been added.
I have the feeling this is very subjective…
Also after further research, i found the keyword “synergic buyer”. Can we assume that if nothing says that the buyer is synergic (he really want to buy) vs the buyer is financial (he is “indifferent”), then we dont add the premium ?
GTM doesn’t ignore it-- it’s just already accounted for in this method. GPCM doesn’t account for it because it’s not based on the sale of the entire company. You would add it if you were in a scenario that warranted a control premium (synergistic buyer using GPCM to buy 70% of the shares, for example).
The text also says that premia and discounts apply depending on where you start and where you want to go with the valuation.
After additional research yesterday i have found out that in the mock exam, the reason why they didn’t add the control premium is because the data were probably based on whole company sales (control situation) and the guy in the question also wants to purchase a control position => No adjustement necessary.
Basically for GPCM
Original data / Target Data
Control / Control => No adjustment
Control / Non-control => Discount for Lack of Control
Non-control / Control => Control premium
Non-control / Non-control => No adjustement
This means we have to look in the question for keywords suggesting synergic/strategic buyers.