Valuation for the squeeze-outs under the Slovene Companies Act (ZGD)

Valuation for squeeze-out purpose in Slovenia is defined by the Slovene Companies Act. Cash compensation to squeezed-out shareholders should reflect financial situation of a company and its profitability, which unfortunately does not determine valuation procedures appropriately.
Therefore, we should look at USA theory and practice as this country has long-time experience in squeeze-outs. Practice is made by the rules of judges, who do not share the same view on this topic. Therefore, state laws and common practice vary considerably and consequently business valuators apply different methodologies.
Although professional view on squeeze-outs in Slovenia had advocated fair valuation with no discounts so far due to some experience in the USA. P&S CAPITAL would disagree as this is not common practice in the USA.
According to USA theory and practice it would be »fair« to treat all shareholders equally and therefore, to apply discount for lack of liquidity, which is associated with valuation of majority equity stakes, and control premium. On the other hand, discount for lack of marketability, which is associated with valuation of minority equity stakes, and discount for lack of control should not be applied. This is also in line with the Slovene Companies Act.