In 2015, record valuations drove a boom in mergers and acquisitions activity, leaving many to wonder when the deal bubble would burst. In 2015, US buyout firms paid an average of 10.3 times EBITDA compared with the previous record of an average 9.7 times multiple in 2007. Despite hitting a peak, valuations are still expected …
Category: Valuation
What Leads to Premium or Discount When It Comes to Valuation Multiples?
As you might expect, sellers look for a premium multiple. Buyers typically will only consider paying a premium to market if they are adequately convinced that the value of the potential target justifies it. This begs the question: How does one derive a rationale for discount and premium multiples on a business? There are a …
Why Price Is the Last Thing to Talk about When Buying a Company
Time your negotiations by understanding owner psychology. Everyone wants to talk about price in mergers and acquisitions. It’s often the number one focus of buyers and sellers…but for opposite reasons. Both are likely to say they are looking for a “good deal,” but this can have a completely different meaning depending on the perspective. Buyers …
High or Low? What Price Should You Put in the LOI?
I’m frequently asked about the “right” price to put in the letter of intent. As you will know, the LOI is an important milestone in the M&A process, because it establishes a “gentleman’s agreement” before the formal deal is settled. You have yet to compete due diligence at this stage, and figuring out the right …
How to Manage Unrealistic Expectations of Value
How often do sellers have unrealistic expectations of their company’s value? What’s the best way for a buyer to approach them early in the process and address their concerns? Todd Nelson, Capstone Valuation Advisor, answers: This is a common issue where sellers hold high value expectations for their businesses. While price is not the only …
PE Deals Slowly, But Steadily Increase
Last quarter, we predicted there would be a wave of deals in the private equity sector in the coming months. While we may not have seen a “wave” of transactions, deal volume has slowly, but steadily increased in 2013, according to GF Data. While the number of PE deals has not reached a 4Q 2012 …
How Long Does it Take to Sell A Private Company?
According to Business Valuation Resources, new analysis shows time needed to market and sell a privately held business is 211 days, up from 200 days in previous analysis. Todd Nelson, Capstone Valuation Advisor, weighs in on these observations: “There are many variables that impact the time it takes to complete a private company sale. Those …
Future Private Equity Deals Likely
by John Dearing, Capstone Managing Director GF Data recently published a report noting private equity deals valued between $10 and 250 million averaged 6.4x – the highest levels in three quarters. This data is an interesting indicator of the M&A market. Although multiples are up, deal volumes remain sluggish for private equity as a whole. …
Why You Should Be Wary When Discussing EBITDA In M&A
* Guest post by John Dearing, Capstone Managing Director Just last week during a valuation discussion, I noted to the Board to be wary of EBITDA multiple discussions in the world of M&A. As an article from PE Hub points out, when you ask five different professionals to calculate a company’s EBITDA, you’ll come up with …
Valuation: Flowers Food buys Wonder Bread
Valuation is a key component of the acquisition process that is widely misunderstood, because people tend to adopt a narrow financial perspective. Valuation should be anchored in your strategic rationale for buying another company in the first place. It all comes back to your business strategy and the synergies that will be created by the …
