Mergers & Acquisitions from A to Z

By Andrew J. Sherman | Go to book overview

CHAPTER 8
Valuation and Pricing of the
Seller’s Company

Price is the paramount issue in a merger and acquisition transaction. Beyond anything else, it determines the amount of value that is transferred to the seller in exchange for ownership of the business that is for sale. It is the number one concern for both buyers and sellers, and it ultimately determines whether or not a transaction can be consummated. It is also always critical to distinguish between price and terms. The price could be very favorable to a seller but be crippled by alternative terms that make the transaction unpalatable, costly, and risky. There are several established and traditional valuation methods used to estimate the price range within which a business will be sold. The actual price, however, is ultimately determined by what companies are actually willing to pay, which will be as much a function of market conditions as it is of economic formulas.

Although a formal valuation of the seller’s business is a vital component of the buyer’s analysis of the proposed transaction, it is important to realize that valuation is not an exact science, nor will valuation alone typically drive the terms and pricing of the transaction. There are numerous acceptable valuation methods, and in most situations, each will yield a different result. Unfortunately, no method will answer the question: “How much is the business actually worth?” That question can be answered only through the receipt and negotiation of term sheets. The reality is that the market determines the price, and valuation, while an important exercise, is only indicative of what the market has paid for

-144-

Notes for this page

Add a new note
If you are trying to select text to create highlights or citations, remember that you must now click or tap on the first word, and then click or tap on the last word.
One moment ...
Default project is now your active project.
Project items
Notes
Cite this page

Cited page

Style
Citations are available only to our active members.
Buy instant access to cite pages or passages in MLA 8, MLA 7, APA and Chicago citation styles.

(Einhorn, 1992, p. 25)

(Einhorn 25)

(Einhorn 25)

1. Lois J. Einhorn, Abraham Lincoln, the Orator: Penetrating the Lincoln Legend (Westport, CT: Greenwood Press, 1992), 25, http://www.questia.com/read/27419298.

Note: primary sources have slightly different requirements for citation. Please see these guidelines for more information.

Cited page

Bookmark this page
Mergers & Acquisitions from A to Z
Table of contents

Table of contents

Settings

Settings

Typeface
Text size Smaller Larger Reset View mode
Search within

Search within this book

Look up

Look up a word

  • Dictionary
  • Thesaurus
Please submit a word or phrase above.
Print this page

Print this page

Why can't I print more than one page at a time?

Help
Full screen
Items saved from this book
  • Bookmarks
  • Highlights & Notes
  • Citations
/ 318

matching results for page

    Questia reader help

    How to highlight and cite specific passages

    1. Click or tap the first word you want to select.
    2. Click or tap the last word you want to select, and you’ll see everything in between get selected.
    3. You’ll then get a menu of options like creating a highlight or a citation from that passage of text.

    OK, got it!

    Cited passage

    Style
    Citations are available only to our active members.
    Buy instant access to cite pages or passages in MLA 8, MLA 7, APA and Chicago citation styles.

    "Portraying himself as an honest, ordinary person helped Lincoln identify with his audiences." (Einhorn, 1992, p. 25).

    "Portraying himself as an honest, ordinary person helped Lincoln identify with his audiences." (Einhorn 25)

    "Portraying himself as an honest, ordinary person helped Lincoln identify with his audiences." (Einhorn 25)

    "Portraying himself as an honest, ordinary person helped Lincoln identify with his audiences."1

    1. Lois J. Einhorn, Abraham Lincoln, the Orator: Penetrating the Lincoln Legend (Westport, CT: Greenwood Press, 1992), 25, http://www.questia.com/read/27419298.

    Cited passage

    Thanks for trying Questia!

    Please continue trying out our research tools, but please note, full functionality is available only to our active members.

    Your work will be lost once you leave this Web page.

    Buy instant access to save your work.

    Already a member? Log in now.

    Search by... Author
    Show... All Results Primary Sources Peer-reviewed

    Oops!

    An unknown error has occurred. Please click the button below to reload the page. If the problem persists, please try again in a little while.