Let VFP help you understand value so you can begin the countdown to transaction completion.
Business transactions are the result of two parties negotiating an agreed upon price. The key to negotiations and to ultimately successful transactions is information. Our team at VFP has experience on all sides of transactions and our goal is to arm you with information to enable educated, informed decisions.
Using a business valuation for business transactions helps seek to achieve the objectives of both the buyer and the seller.
Unfortunately, market statistics highlight that successful transactions are not the norm. Some of the market statistics regarding transactions can be summarized into the following:
- Less than 10 percent of businesses that wish to sell are sold.
- 2/3 of business owners regret selling.
- More than 1/3 of transactions fail to return the cost of capital.
There are many variables that impact the price that is paid in a business transaction. Each party to the transaction has a vested interest in getting a number that they are willing to settle on. VFP works with parties throughout the transaction process to:
- Define the key value drivers and impact items;
- Assess and develop a potential range for deals;
- Develop sensitivity analysis for key business risks;
- Model the impacts of deal terms/transaction structure.
Refer to our blog to learn more about the Types of Business Transactions.
Other market data indicates that two-thirds of U.S. S-Corporations (or the majority of all privately held companies) will change ownership in the next decade as baby boomers retire and leave their businesses. This level of transition in the market is likely to depress pricing and increase the number of companies that are never sold.
VFP understands these dynamics and works with company ownership to not just provide a report that states a value, but to develop a shared understanding of value and how to explain and negotiate price for their specific company.
Some transaction work that VFP has provided to clients is outlined below.
- Prepared a range of value report that educated a client in a professional services company on key value drivers that they relied on in their negotiation to sell the company. This collaborative work led to a top of market transaction price to the client.
- Modeled transaction structure scenarios to educate a client on the impact of various transaction structures for their company and the specific buyer that had made an initial offer. This collaborative work led to the client ultimately negotiating a structure that led to significantly higher after-tax dollars to the seller.
- Worked with a public company in their divestiture of numerous divisional operating units. Provided a range of value analysis, identification of key valuation drivers, and prospective buyer synergy analyses to assist management in their price negotiations with buyers.
- Valued a venture-backed company (including all levels of their capital structure waterfall) to assist management in the negotiation of their next financing round.
- Build a scenario-driven financial model to aid a public company in their strategic planning. Outputs included scenario analysis of the projected potential impacts on investment banking cash flow valuation models.
Why Should I Use VFP When Buying or Selling a Business? Our transaction work is performed as an independent advisor/valuation expert whose compensation is not linked to a specific outcome or to forcing a deal through the process. This approach allows us to avoid any potential conflicts or interest in our work.
If you would like to read more about VFP’s valuation services visit What is Valuation?; Tax Valuation & Planning; Fairness Opinions; Shareholder Disputes and How is VFP Different? in the Valuation section.