It comes from a 2004 Delaware court case, which found “recent appraisal cases that correct the valuation for a minority discount by adding back a premium ‘that spreads the value of control over all shares equally’ consistently use a 30% adjustment” for the control premium [1]. (Under Delaware law, shareholders are entitled to the pro rata share of a company’s fair value. The courts can and do revise merger prices to reflect this.)
It’s “a premium of 15% over Squarespace's closing share price of $38.19 on the NYSE on May 10, 2024,” the last business day before the buyout was announced.
That said, you see the bankers bending over backwards to find a metric that satisfies Doft.
Companies have big shareholders and small. Absent controls, the big shareholders (and management) have an incentive to negotiate deals that are better for them than for the small shareholders. Delaware is good at designing these controls, which is why savvy investors like companies to be based there.
One of these controls allows shareholders to sue if they think the company they own stock in was sold too cheaply. In those cases, the court will step in to check the math. That happened in Doft.
Most of the case revolved around comparing Travelocity’s value to Expedia’s. But buying a share in Expedia is different from buying all of Travelocity, because the latter lets you e.g. pay yourself—the owner—all the money in the bank account as compensation or unilaterally sack management. The value of this privilege is called the control premium. After the court valued Travelocity conventionally, it added a control premium of 30% to come up with the final enterprise value.
Why 30%? Because that’s what most valuation consultants did. What Doft changed was now that convention was cited in case law. So a shareholder who is upset about their shares being sold at a 15% premium can credibly threaten to sue and win, which companies want to avoid, and so we get this circular convention of a 30% control premium (loosely defined) being the norm for converting companies from widely-held (usually public) to narrowly-held (usually private).
Really? The sub-headline near the top of your link says 29%, so basically 30%.