When valuing a company, a distinction must often be made between the stand-alone value and the increase in value that can result for the buyer after purchase. The goals of the seller and the buyer are clear: The company buyer will try to base the assessment on the stand-alone value and skim off any additional value that arises. The seller, on the other hand, will try to include the additional value in the evaluation. The negotiation often results somewhere between these two positions. It is definitely worthwhile for the seller and buyer to understand the opposite perspective and to use the knowledge of these valuation differences in the negotiations.
In the past, when it comes to valuations, three main ways of explaining value have been developed:
- the market-oriented view,
- the resource-oriented view and
- the value-oriented view.
What all of these points of view have in common is that they can be used as factors to increase the company’s value during a negotiation. Ultimately, a lot comes down to negotiations and having the right partners on your side.
A large part of the price achieved during a negotiation – depends on the skills of the seller and their advisors. The final number during a valuation and negotiation is never based exclusively on the intrinsic value of the business such as its assets, EBITDA etc., and it is also not entirely dependent on the state of the economy or the industry.
A successful M&A consultant needs to not just sell a business – they need to communicate how they will add value by following these steps:
- Preparation prior to sale;
- Presentation (Information Memorandum etc.);
- Persuasion – the ability to negotiate a good deal against the toughest negotiators.
There are specific things that can be done to attract strategic buyers, the kind who’ll value your business not on the earning or the assets, but on the potential they can develop, on synergies they can exploit.
Get in touch if you wish to discuss how consultants at FabExchange utilize their winning M&A strategy. If you would like me to assist you, please contact firstname.lastname@example.org.