Valuation: Discounts and Premiums - A Practical Guide (2026)

Practical guidance on applying valuation adjustments consistently and defensibly

A 15% non-controlling stake in a private company valued at $80 million is not necessarily worth $12 million.

Depending on how discounts and premiums are applied, or misapplied, the same stake may materially diverge in value. In practice, many valuation disagreements stem not from the underlying business itself, but from inconsistent treatment of control, liquidity and shareholder rights.

In this thought catalyst, we explore how valuation adjustments should be applied across business valuation, financial reporting and private market contexts, including practical considerations relevant to Vietnam and ASEAN markets.

Key Terms Used in This Article

• Discount for Lack of Control (DLOC): A discount applied when the subject interest does not have control over strategy, dividends, governance or exit decisions.
• Discount for Lack of Marketability (DLOM): A discount applied when the subject interest cannot be freely sold or converted into cash.
• Control Premium (CP): A premium reflecting the additional value associated with having control over a business.
• Guideline Public Company (GPC) method: A valuation method based on comparable listed companies.
• Guideline Transaction Method (GTM): A valuation method based on comparable M&A transactions.
• Discounted Cash Flow (DCF): A valuation method based on forecast cash flows and risk.

Key Takeaways

• Discounts for lack of control and marketability should only be applied when the subject interest differs from the starting level of value.
• Guideline transaction multiples are typically already control-based, so adding a control premium may double count.
• Valuation adjustments should be compounded, not added.
• DLOM assumptions should reflect realistic liquidity horizons, volatility and shareholder restrictions.
• Vietnam and ASEAN private markets require additional attention to exit routes, foreign ownership limits and shareholder agreement terms.

Why Discounts and Premiums Matter

Valuation begins with an economic benchmark, whether based on cash flows, market comparables or underlying assets. However, that benchmark may not reflect the exact rights and restrictions attached to the interest being valued.

Most valuation adjustments relate to three questions:

1. Control: Can the holder influence strategy, dividends, capital allocation or exit decisions?
2. Liquidity: Can the interest be sold quickly and at reasonable cost?
3. Protection and information: What rights exist under the charter or shareholders’ agreement?

As private market transactions, financial reporting scrutiny and investor expectations become more sophisticated across Vietnam and ASEAN, valuation adjustments are receiving greater attention from auditors, boards and transaction stakeholders.

Understanding Levels of Value

Valuation adjustments hinge on the level of value you start from. Misidentifying your starting point leads to double-counting or missing adjustments entirely.

 The key principle is simple: apply adjustments only when the subject interest differs from the base value produced by the chosen method.

Core Valuation Adjustments

Control Premium

A control premium reflects the additional value associated with directing strategy, cash flows and exit decisions. It is commonly observed in takeover transactions where buyers pay above unaffected minority trading prices.

However, observed premiums often include:

• strategic synergies,
• competitive bidding effects,
• buyer-specific considerations.

As a result, control premiums should not be applied mechanically. Guideline transaction multiples often already reflect control, and many fair value measurements under IFRS 13 already assume market-participant control where appropriate.

Discount for Lack of Control

A discount for lack of control reduces value from a control basis to a minority basis. It reflects limited influence over:

• dividends,
• governance,
• strategy,
• liquidity events.

A DLOC may be appropriate when:

• the starting methodology implies a control-level value,
• but the subject interest is non-controlling.

Discount for Lack of Marketability

A discount for lack of marketability reflects the economic cost of illiquidity. It is relevant where the subject interest cannot be freely sold, such as private shares or transfer-restricted securities.

Key DLOM assumptions typically include:

• expected holding period,
• volatility,
• transfer restrictions,
• expected liquidity events,
•  quality of shareholder protections.

In Vietnam and ASEAN private markets, thinner exit environments and concentrated ownership structures can materially affect DLOM assumptions.

Start With the Right Base

Your adjustment path depends on the starting methodology used.

• DCF (entity basis) implies a control, marketable level of value, and may require applying both DLOC and DLOM when valuing an illiquid minority stake.
• GPC method implies a minority, marketable level of value, and may require a DLOM if the subject interest is illiquid.
• GTM method implies a control level of value, often including synergy effects; therefore, a control premium should not be added, but a DLOC may be considered when valuing a minority stake.

Valuation adjustments should be applied multiplicatively, not additively. Adding discounts together can materially overstate their combined effect.

Common Valuation Pitfalls

Common errors include:

• adding a control premium to GTM multiples,
• applying DLOC when the starting point is already minority-level,
• using generic DLOM ranges without considering holding period or volatility,
• double-counting risks already reflected in cash flows or discount rates.

A defensible valuation should clearly connect the selected adjustments to:

• the rights attached to the subject interest,
• expected liquidity,
• realistic market-participant assumptions.

Vietnam and ASEAN Considerations

In Vietnam and ASEAN private markets, discounts and premiums may be affected by factors such as:

• thinner exit markets,
• longer expected holding periods,
• limited secondary transaction activity,
• foreign ownership limits,
• licensing restrictions,
• strong ROFR or consent provisions in shareholder agreements.

These factors should generally be reflected through rights analysis, governance assumptions and liquidity expectations, rather than broad unsupported adjustments.

Conclusion

Discounts and premiums are analytical judgments, not balancing adjustments.

Applied appropriately, they help align valuation conclusions with the economic reality of the subject interest being valued. Applied inconsistently, they can materially distort value and introduce unnecessary subjectivity into valuation analyses.

Applying control-related and marketability-related adjustments often requires significant professional judgment, particularly in private market, transaction and financial reporting contexts.

How can these principles apply to your specific transaction or financial reporting engagement?

Get in touch with the Forvis Mazars Vietnam financial advisory team for a consultation.

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