We can't expect all private company buyers to act the same way!

Nancy Fannon and Heidi Walker, whose new Guide to transaction databases comes out this week from BVR, sent us the following comment about the fact that individual transactions rarely all share the same characteristics:

“The transaction data provided by the databases is sometimes maligned for a variety of reasons, with protractors citing the difficulty of using and interpreting it, the fact that it isn’t uniform, that individual transactions within a group of transactions don’t represent the same thing, and so forth.  This all, in fact, is true. The fact that the data isn’t uniform, that it doesn’t represent the same  bundle of assets and liabilities, or isn’t all expressed in cash or cash equivalents, is a function of the fact that buyers and sellers in the marketplace don’t all behave in a uniform manner.  We can’t say ‘hey all you buyers out there, can you please all act the same way so it’s easier for us business appraisers?’  

“So let’s think for a moment about what the database providers are:  they’re providers of data.  They alert us to the fact that a transaction has occurred, and that there is information available about it.  It is our job, as well trained valuation analysts, to be able to analyze and interpret the data—and if there isn’t enough information about the particular transaction, either get more information, or reject it.  Can that take time?  sure....its a lot more work than just downloading an SIC code, taking a mean or median and applying it to your subject company’s revenue or some level of earnings—but when done with deliberation and thoughtful application, we think it can provide some of the most powerful evidence of value of any of the variety of valuation methods that analysts have in their toolkit.  And so, we hope that our guide helps guide you in the application of this method.”