Don’t rush to get a signed letter of intent (LOI) by kicking the can down the road on price. A signed LOI is a significant milestone in the M&A process, indicating mutual interest in an acquisition. The document covers the basic parameters of the deal that both buyer and seller agree to including what will …
Tag: price
Does the Highest Bidder Always Win the Deal?
The short answer to this question is no. Some owners may sell to the highest bidder, but this is not always the case. Differentiating by price alone is problematic for a number of reasons, the most obvious being that someone can always outbid you. In addition, when it comes to privately-held transactions, especially, we find …
How to Bridge the Price Gap in Acquisitions
Price is often the number one focus in mergers and acquisitions and everyone is eager to get down to the numbers. However, as you might expect, buyers and sellers have very different expectations on price, which can lead to friction between the two parties. On the one hand, most sellers plan to offer their business …
Why Acquisition Is Not All about Price: Amazon Acquires Souq
Many are convinced that the buyer with the most money always wins the deal. Although many acquisitions by financial acquirers and strategic buyers are driven by the desire to grow revenue and the company’s bottom line, it is possible to win an acquisition without offering the most amount of money. A successful acquisition is about …
What Is the Guideline Public Company Method in Valuation?
The Guideline Public Company (GPC) Method is one of the more popular valuation methodologies because people often hear about it in the news or in presentations. This method identifies prices for individual shares of publicly traded companies that are subject to the same industry dynamics as the subject company (the company you are trying to …
Will Bayer Acquire Monsanto? Lessons for the Middle Market
Monsanto has rejected Bayer’s all-cash $62 billion bid, but says it is open to negotiations. A combination of Bayer and Monsanto would create the largest seed and pesticide business globally with $67 billion in sales. While you may not be creating an agricultural behemoth with your acquisition, there are a few lessons we can learn …
What Leads to Premium or Discount When It Comes to Valuation Multiples?
As you might expect, sellers look for a premium multiple. Buyers typically will only consider paying a premium to market if they are adequately convinced that the value of the potential target justifies it. This begs the question: How does one derive a rationale for discount and premium multiples on a business? There are a …
How Much Should You Budget for Mergers and Acquisitions?
This is a difficult question to answer. Of course your budget (in both human resources and dollars) will vary depending on your capabilities and the size of the transaction. Acquisition is a substantial task to take on so ideally you would have at least one person that is 100% dedicated to running the M&A project …
High or Low? What Price Should You Put in the LOI?
I’m frequently asked about the “right” price to put in the letter of intent. As you will know, the LOI is an important milestone in the M&A process, because it establishes a “gentleman’s agreement” before the formal deal is settled. You have yet to compete due diligence at this stage, and figuring out the right …
How to Manage Unrealistic Expectations of Value
How often do sellers have unrealistic expectations of their company’s value? What’s the best way for a buyer to approach them early in the process and address their concerns? Todd Nelson, Capstone Valuation Advisor, answers: This is a common issue where sellers hold high value expectations for their businesses. While price is not the only …
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