Business value or offer price: what are you comparing?

01

Understand the assumptions behind value

An assessment of value depends on available information, prospects, risks, context and the methods used. Interpret it within its scope and assumptions, not as a promised sale price.

Comparable transactions and multiples can inform professional work, but an observed transaction is not automatically comparable to your business.

Ref. [1], [2]

02

Check whether the amount is for assets, operations or shares

Does the amount relate to operations, certain assets or the company’s shares? How would cash, debt and working capital be treated? Answers depend on the proposed transaction structure.

Comparing amounts without understanding these conventions can be misleading. Appropriate valuation, accounting, legal and tax professionals may be needed to examine them.

Ref. [1]

03

Examine payment terms and conditions

A headline price may include deferred payments, conditional amounts, holdbacks or adjustments. Timing and conditions affect the comparison. A proposal subject to financing or due diligence is not the same as money received.

• What portion would be paid at closing?
• Which amounts depend on conditions or future results?
• What adjustments and obligations are contemplated?

Ref. [1]

04

Understand the buyer’s perspective

An acquirer may see synergies, integration costs or risks specific to its situation. Its offer expresses a position in a particular transaction; it does not necessarily replace an independent assessment of value.

Due diligence findings may also change the discussion. Consistent documentation helps explain differences without guaranteeing that none will arise.

Ref. [1], [2]

05

Agree on the work and deliverable before starting

Clarify the intended use: strategic discussion, financing, a transaction or another need. Agree on the scope, required information and appropriate professional deliverable.

Value Baseline provides a reference point within an agreed scope. Its name does not presume a particular valuation report or a price at which the business could be sold.