Every shareholder wants to know the value of their company. However, most shareholder don’t think about their company’s true value unless they are seeking capital, or planning for a liquidity event. When a CEO is approached by another company that begins talking about an acquisition, the question about value quickly surfaces. Generally, we don’t advocate throwing a number out to a potential acquirer, but it does make sense to have a general idea of how much the market will pay so you know how good or bad an initial offer truly is. In fact, many companies become clients of ours because they are being pursued by a acquirer and want to know the value of their company. Experience with mergers and acquisitions helps greatly in being more accurate about what a company will obtain in the market.

When there are multiple interested acquirers involved, the company’s valuation is the highest negotiated amount. When you are dealing with one acquirer, obtaining an accurate valuation is more important. If your expectation is too high, you are likely to drive away your acquirer. If your expectation is too low, you are likely to leave money on the table.

Our valuation tool can provide you a rough calculation for the value of your company. However, this tool is over-simplified and limited by the information you input, which could be biased or misstated. This tool should not substitute the need for a good M&A professional to perform a valuation if you are in discussions to be acquired. We know areas to look for in your financial statements that may provide extra value and we have access to information about historical transactions and the current market.

It is best to have an M&A professional involved in any discussion with an acquirer as we know how to negotiate when they bring up various valuation methodologies and assumptions.