A common reason for performing a business valuation is to prepare for a company’s sale, merger, or acquisition. A merger is the combining (or pooling) of two businesses, while an acquisition is the purchase of the ownership of one business by another. Shareholders in a company who are considering taking over another business must determine whether it would be beneficial to make such a purchase. Whether buying or selling a business, it is extremely important to know a company’s true value. Business valuations in merger & acquisition (“M&A”) situations are complex because they often involve issues like synergy and control, which could enhance the value of a target company. Many business owners are uncertain or unrealistic about their company’s current fair market value. Relying on gut instinct or industry rules of thumb to set an asking price could increase the risk of leaving money on the table. Also, quick-and-dirty pricing formulas can be outdated, ambiguous, or fail to take into account the unique characteristics of a specific business. During any transaction, a knowledgeable, unbiased, and well-supported valuation opinion can provide the strong foundation needed for potential negotiations.
