Valuation experts sometimes assume that M&A deal terms have no impact on value. “Terms have a huge impact on the value transfer,” says investment banker Michael Poole (PCE Investment Bankers Inc.). Speaking at the 2016 ASA Advanced Business Valuation Conference, Poole said this often comes up when doing fairness opinions and there may be a tendency to not take the terms into account. The trouble is, when valuation experts look at market multiples, they often have no idea as to the terms. Did the seller take some financing back? Did the buyer get stock that was deeply subordinated? You can’t simply assume the multiple is based on an all-cash deal. Yes, some of the reported transactions will disclose terms—there are always exceptions—but most will not.
For more details, see the article, “Transaction Valuation Tips From an Investment Banker,” in the December issue of Business Valuation Update.
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