Legal Definitions - control premium

Control premium refers to the additional amount paid for shares that carry the power to control a corporation. This premium is calculated by comparing the value of the controlling block of shares with the cost that would be incurred if the shares could be acquired at the going market price per share.

For example, if a company's shares are trading at $50 per share, but a buyer wants to acquire a controlling block of shares, they may have to pay $60 per share to gain control. The $10 per share difference is the control premium.

Control premium is often paid in mergers and acquisitions when a buyer wants to gain control of a company.