However, it’s paramount to remember that although a typical physician-investor in an ASC may be considered a “minority” owner, the fact that the physician-investor controls the revenue and the business makes regular distributions is a “major” factor.
A minority discount is an economic concept reflecting the notion that a partial ownership interest may be worth less than its proportional share of the total business. The concept applies to membership interest with voting power because the size of the voting position provides additional benefits or drawbacks. Typically, a minority owner (less than 50%) in a business does not exercise “control” over the entity. The more common prerogatives of ownership control of a business enterprise include:
• Appoint management Determine management compensation and perquisites
• Set policy and change the course of business
• Acquire or liquidate assets
• Select people with whom to do business and award contracts
• Make acquisitions
• Liquidate, dissolve, sell out, or recapitalize the company
• Declare and pay dividends
• Change the articles of incorporation or bylaws
• Block any of the above actions
Therefore, when valuing a minority membership interest, the per-unit amount of the fair market value of the equity of the ASC as a whole is discounted to reflect the lack of control the specific interest possesses (typically the physician members). Minority interest discounts range between a Low of approximately 13.8% to a High of 40.0%.
