The ''Value of Control'' in Mergers and Acquisitions

Many hostile takeovers are justified on the basis of the existence of a market for corporate control, where investors and firms are willing to pay large premiums over the market price to control the management of firms.
The value of wresting control of a firm from actual management is inversely proportional to the perceived quality of that management and its capacity to maximize firm value. Generally, the value of control will be greater for a poorly managed firm, that operates with optimum capacity, than it is for a well-managed firm.
If we estimate a value for the firm (assuming that existing management practices continue), call this a status quo value, re-estimate the value of the same firm (assuming that it is optimally managed) and call this estimate the optimal value, the value of changing management can be written as:
Value of management change = Optimal firm value – Status quo value
We can also write :
Value of control = Value of firm with restructuring – Value of firm without restructuring
considering that the value of control of a firm derives from changes that can be made to existing management policy susceptible to increase the value of the firm. These changes or restructurings (which we saw in previous paragraph) can cover many areas: assets can be acquired or liquidated, the financing mix can be changed, the dividend policy reevaluated, and the firm can be restructured in order to maximize value.
The value of control is negligible for firms that are operating at or close to their optimal value, since a restructuring will yield little additional value. Instead, the value of control can be substantial for firms that are operating at well below optimal value, because the restructuring can lead to a significant increase in value.