Control Premium in M&A: Case Study of Exxon Mobil-Phillips 66? Wait.

Control premium is the price above the unaffected market price of a target required to obtain voting control, and in large deals it sits around 30% on average, even as market multiples compress.

In my opinion, the control premium framework matters most when assembling a package for a full takeover, not a minority stake or a minority consolation prize. PwC’s mid‑2025 analysis shows the typical premium for large deals (over $1B) held steady near 30% across a long historical window through Q2 2025. That stability signals buyers anchor value in intrinsic potential, not just price volatility reflected in the market. Yet the rise and fall of forward multiples changes the economics of control, even when the percentage premium remains near its long‑term average.

From 1H 2024 to 1H 2025, global deal value rose from about $1.3 trillion to $1.5 trillion, a 15% year‑over‑year increase, while median global EBITDA multiples declined to roughly 10.8x, down about 14% versus Q4 2024.

That combination, more deals, cheaper earnings multiples, tightens the implied control price buyers are willing to justify. In practice, buyers pay approximately the same premium over the target’s pre‑announcement price, but the base value is lower due to multiple compression.

PwC also notes that large‑deal multiples in Q2 2025 were about 37% below their Q3 2021 peak, and all‑deals multiples were 17% below their Q2 2021 peak. The upshot: the price ladder has shifted. The same 30% premium buys less enterprise value than it did a few years ago, so control triggers more careful scrutiny of synergies, integration costs, and regulatory risk.

Despite lower market multiples, large deals still carry roughly the same 30% control premium. That means absolute prices for large targets have fallen more than those for smaller targets, even though the percentage premium over pre‑announcement levels stays similar. In other words, the bar for control remains high, but the bar for market multiples has moved down.

From a risk perspective, tariff exposure, cross‑border risks, and slower forward growth for large caps push valuation multiples lower. PwC connects these macro factors to lower forward earnings expectations, which pressurize appraised values even as buyers insist on disciplined premiums to secure control. This dynamic helps explain why, despite a stable premium, the economics of control position become more challenging in a volatile or protectionist environment.

A closer look at US dynamics through Q3 2025 shows that whole‑company acquisitions dominate the activity: about 75% of deal count and $416B of the $645B total value in the quarter came from these control‑driven transactions. That centrality of control deals matters for practitioners because it shapes negotiation dynamics, antitrust risk, and financings. When buying control, you pay for governance rights, cost of capital, and the integration footprint, not just the target’s current cash flows.

In practice, sponsors and corporate buyers have continued to pay premium multiples where they see lasting secular growth and pricing power. Software, industrial services, and infrastructure remain pockets where control premiums justify themselves through tangible scale and cost synergies.

Yet the premium you can justify now is tightly linked to funding costs and regulatory considerations. KPMG and other providers flag ongoing bid‑ask spreads between buyers and sellers, with sellers anchoring to pre‑2022 valuations and buyers pushing for disciplined premiums in light of higher funding costs and tighter capital markets.

Regulatory risk adds another layer. In the US and EU, merger guidelines and the focus on “killer acquisitions” raise execution risk in highly concentrated sectors. That risk depresses the feasible control premium in some cases, even when buyers are prepared to pay up for strategic assets. The net effect is a tougher path to closing, with more emphasis on remedy packages, divestitures, and divestment sequencing to win antitrust clearance.

Dell’s 2016 EMC deal provides a practical study. Dell paid approximately $67 billion for EMC, with a premium widely cited near 28% to EMC’s pre‑announcement trading price. The deal combined Dell’s hardware strength with EMC’s data storage leadership, creating a platform for integrated enterprise solutions. The premium reflected governance value over a broader portfolio, strategic benefits of scale, and expected cost savings from integration. The closing process illustrated the importance of regulatory clearance and aligning long‑term technology roadmaps with customer requirements. In the end, the deal validated the basic premise: buyers pay a control premium to secure voting control and strategic alignment, but value realization hinges on execution, integration, and the ability to monetize synergies.

What does this mean for practitioners today? First, establish a baseline: a control premium around 30% remains valid for large deals, but test it against the target’s size, growth profile, and sector. Second, adjust valuation models to reflect lower EV/EBITDA multiples in the market. If the median multiple is 10.8x, sensitivity to the premium must account for compression. Third, consider cross‑border and regulatory risk in due diligence and deal structure, these factors increasingly constrain the feasible premium and may require asset divestitures or divestment sequencing to win antitrust clearance.

For deal teams, the practical playbook is clear.

Use a disciplined approach to premium justification:
– Define the strategic rationale for control, with concrete synergies, not just revenue uplift.
– Model multiple compression scenarios and calibrate the premium to the level of certainty around those synergies and the timing of realization.
– Prepare robust integration plans that detail cost savings, payroll and operations harmonization, IT consolidation, and customer retention strategies.
– Build a credible regulatory path, with potential remedies, to avoid last‑minute closing risk.

Dell-EMC shows a control premium matched strategic value, but success depended on integration speed, platform alignment, and regulatory resolution. In a current context, buyers must demonstrate a credible path to value creation despite tighter multipliers and higher funding costs. Sellers should anchor to pre‑2022 valuation expectations but remain open to premium discussions if the buyer offers clear value realization and solid financing.

As we wrap, here are practical notes for 2025 forward work. First, track the 30% premium benchmark but stress‑test it against sector and target size. Second, monitor global deal value trends (1H 2024 to 1H 2025 showed a 15% rise) and the concurrent EBITDA multiple compression to 10.8x. Third, pay attention to regulatory signals and cross‑border risk in any high‑profile, large‑target deal. Fourth, use a real case lens (Dell-EMC is a good reference) to frame the premium in terms of governance and integration risk, not just price.

If you want to deepen your understanding, keep exploring Matactic’s glossary and dive into more terms and practical scenarios. Sign up for our free M&A course to sharpen your ability to value control premiums, assess synergies, and navigate regulatory hurdles with confidence. In my opinion, staying grounded in data, staying disciplined on structuring, and staying practical on execution will keep you ahead in this market. Peace out.