Stephen McGee (Grant Thornton) has some fun with valuation formulas by coming up with a version of standard equations for use in M&A transactions: Price = Value + (S+C)e.
- V is the quantiﬁable value calculated using one of several traditional valuation approaches: comparable public companies, comparable transaction multiples or a discounted cash ﬂow analysis – methodologies you can use to calculate a somewhat scientiﬁc value for a company
- S is the story, and it needs to be a compelling one
- C is the competition generated to buy the company, and
- e is the emotion that comes with any M&A transaction.
“The goal of any M&A transaction should be to create — and not simply transfer — value,” writes McGee. He believes sellers who approach the transaction from the point of view of Price = Value + (S+C)e can expect the selling price to be greater than the company’s value.
Click here for McGee’s article “Using M&A Transactions to Create Value”, which was published in the recent issue of Dealmaker.
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