Investment Tips

Misconceptions & Arguments about valuation
Date : 17 December 2012

Seller Misconceptions…

·      Only I can sell my Company. Nobody knows my Company better than I do.

·      Only companies in my industry can acquire my Business.

·      I only need 1 or 2 potential Acquirers to complete a sale.

·      I know what my Company is worth. Unrealistic expectations

·      Different debt structure for Acquirer

·      Different risk profile for Acquirer

·      I do not need to disclose confidential information about my Company in order to sell it.

·      My Company will sell in 6 months.

·      My employees (customers/suppliers) will find out that my Company is for sale and leave me.

·      My relationship with my bank will change if they know the Company is on the market.

The History versus Forecast Debate (Do We Value a Company on Historic Performance or Future Performance?)

·      The Acquirer’s Argument for History

·      I will only pay for what you have done with the Company, not for what I will do with the Company.

·      Forecasts, no matter how diligently prepared, do not reliably predict future performance.

The Seller’s Argument for Forecast

·      I have positioned the Company to achieve the benefits you will reap.

·      I know my market better than anyone else, if I can’t forecast my future performance then no one can.

The Acquirer’s Argument for History

·      Historic performance is the only reliable indication of value since it is based on fact not conjecture.

·      Only Companies with strong market share are in a position to forecast with any degree of reliability.

The Seller’s Argument for Forecast

·      Historic performance is useful to establish trends, but the Company is worth the sum of its history and its potential.

.   My Company reputation has created its own unique position in the marketplace

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Lyndon in 22 March 2019 said:
Hi there! Such a good post, thank you!


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