Non controlling interest is a stake ie. percentage of shareholdings, that is not high enough to control the company’s financial and operating policies.
So assuming if you were buying a 20% stake in a company as a passive investor, how much should you pay for that stake or how much should the seller be selling it for?
20% of net book value? 20% of [fair value of net assets + goodwill]?
Well the answer is:-
20% of value of business LESS the value of non controlling features
Now that we got the formula, we need to work on valuing the business’:-
– assets and liabilities, both tangible and intangible
– non controlling features
Can tell me how?
The moral of the story – We still go a job until the confusion stops.