Module II· Valuation — Regional NotesIntermediate
Question
How does a squeeze-out work, and what valuation requirements apply?
Answer
Mechanics
Squeeze-out: a majority holder with ≥95% of the shares can, by shareholder-meeting resolution, force out all minority shareholders against a cash settlement. Requirements:
- 95% threshold.
- A shareholder-meeting resolution passed by simple majority.
- An adequate cash settlement — typically a valuation under the applicable professional statutory standard as the minimum benchmark, plus a market-price floor (the 3-month average price before announcement). Valuation mechanics: (a) a valuation expert (often a Big Four firm or a specialist) prepares an opinion. (b) An independent contract auditor reviews the opinion. (c) A court can review it via appraisal proceedings. Methodology: a capitalized-earnings / income approach under the professional standard, after-tax CAPM, a standardized risk premium (a large-cap index historically ~5.5%). Market practice: the final settlement is typically 10–25% above the prior share price.
Deep diveShow more details
Examples
Large-cap squeeze-outs are common in take-private and merger sequences (a PE consortium taking a listed pharma private; a global industrial-gas merger that included a domestic squeeze-out).
Pitch tip
"On a 95% acquisition: don't go straight to a squeeze-out — first put a domination agreement in place (cheaper and faster), and do the squeeze-out later."