How are shares valued when a shareholder exits?
The valuation questions that shape price, leverage and the outcome of a private company exit.
BusinessBreakup disputes team · Updated September 2026Share valuation is where most exits are won or lost. Both sides arrive with a number, and the gap between them is rarely about the arithmetic - it is about which method applies and who gets to argue it.
Understanding that before you negotiate is what stops a sensible exit becoming an expensive dispute.
- The articles and any shareholders' agreement decide the method before any accountant does.
- Maintainable earnings, net assets and comparable sales give three different answers - the choice matters.
- Minority and marketability discounts are the most contested element; the conduct that caused the exit affects them.
- A credible valuation before you negotiate is leverage, not paperwork.
Start with the documents, not the spreadsheet
In a private company, value is first a contractual question. The articles or a shareholders' agreement may prescribe a formula, a valuation date, an independent valuer, or a discount for minority holdings.
If they do, that method usually governs - even where it produces a figure one side dislikes. If they are silent, the shares are worth what a willing buyer would pay for them, and the argument begins.
What is actually being valued
Three things drive the number:
- Maintainable earnings - what the business reliably makes, stripped of one-offs and the owners' personal costs.
- Net assets - what the balance sheet supports, which matters most in asset-heavy or loss-making companies.
- Comparable transactions - what similar businesses have actually sold for.
Each gives a different answer, which is why the choice of method is the first real negotiation.
Discounts, and how they are argued
A minority stake in a private company is worth less per share than a controlling stake, because it carries less influence and is harder to sell. Discounts for minority status and lack of marketability are therefore common.
They are also the most contested part of any valuation. Where the conduct of the majority caused the exit - exclusion, unfair treatment - the argument that a discount should apply to the departing shareholder is much weaker.
Valuation as a negotiating tool
Get a credible figure before you open discussions, and know what the other side will argue. A prepared valuation gives you a defensible anchor and a reason to walk away from a poor offer.
It also tells you whether a deal is fundable. If the company cannot buy your shares, the realistic route may be a sale of the whole business - see shareholder exit for how those are structured, and our cost planner for what a contested exit is likely to consume.
Price is usually settled by preparation, not by argument. Knowing the method, the range and the weakness in the other side's case is what makes an exit possible on sensible terms.
Take the free assessment or speak to our team before you name a number.
Questions people ask
- Will a valuer apply a minority discount?
- Sometimes. It depends on the documents, the purpose of the valuation and the conduct involved. Where a buyout follows unfair prejudice, discounts are often argued down or excluded.
- Do I need a formal valuation?
- Not always. An indicative view is often enough to test a proposal and decide whether a formal valuation is worth the cost.
- Does the valuation date matter?
- It can change the answer significantly, particularly where the company has traded poorly since the falling out. Fixing the right date is a live point in most disputes.
Every dispute turns on its facts, documents and timing. This guide does not create a solicitor-client relationship.