A pure control premium is the value the acquirer believes can be created by replacing the target firm's incompetent management, by changing the strategic direction of the target, by gaining a foothold in a market not currently served, or by achieving unrelated diversification.

Question

Quizplus · Accepted Answer

A pure control premium is indeed the value created by the acquirer's ability to make significant changes in the target firm's management, strategy, market, or diversification. This premium is related to the control acquired by the acquirer, and it reflects the potential benefits that can be obtained by exerting control over the target company.

A Pure Control Premium Is the Value the Acquirer Believes