The art of valuation
When it comes to valuation, there are dozens of techniques available to scrutinize every aspect of a company’s historical financial performance. But even the most detailed analysis only yields a range of potential values—values driven by a host of assumptions.
In other words, no matter how impressive a company has been to date, getting one’s company valued at the higher end of the range depends more on the “art” of convincing one or more buyers that the company has more future potential than its past reflects.
The value of experts
Bringing together a select group of attentive and eager buyers is the trademark of a superior mergers and acquisitions (M&A) advisor.
The advisor and the team of bankers should be experts in their respective industries, each with the ability to bring together a diverse universe of buyers. The best potential buyers are ones who fit the goals and personality of the target company and would be willing to pay a premium if they saw real value.
The purpose of this highly focused process is to replace the commodity-driven price-value adage that “something is worth what someone else will pay” with a more proactive approach that “something is worth what the most informed buyer believes it could be worth.” To wit, Benjamin Graham, the father of company valuations, cautioned against impetuous bargain hunters: “Price is what you pay; value is what you get.”
The science of valuation
To be clear, there’s no art without the science, and it’s imperative for a company to have all of its financials (both historical and forecast) in pristine condition before the process begins. Even the smallest error can cause buyers to wonder what else might be wrong.
Because of this potential, an M&A professional should invest a tremendous amount of presale effort in not only ensuring that a company’s financials correctly tie, but also in looking for anomalous financial events that could distract from a proper valuation.
The emotion of a sale
There’s a tremendous amount of emotion involved in the sale of a private company—especially if it’s a family-run business. It’s common for this sentiment to distract sellers from achieving the most important goal of extracting the highest possible value for their life’s work. Recognizing this helps sellers further appreciate the value of an expert team. In these cases, it's often beneficial to have a financial and business transition plan in place, which can show the seller and their family that their personal and/or business legacy goals can be achieved to provide a greater level of comfort.
The bottom line
By using the expertise of those who can correctly position a company to a multitude of different buyer types, the private entrepreneur can take comfort in knowing his or her company will be shown to those who know both the price and value of the enterprise.
How Can I Minimize Taxes in Retirement? (Article)
With the right strategies, it’s possible to defer, reduce and even avoid certain taxes and penalties in retirement.
How Should I Plan for Retirement Income? (Article)
Proper financial planning can help you meet your retirement goals.
How Should I Structure and Execute My Will? (Article)
A last will and testament may be your most important financial document, and you'll want to consider the optimal ways to structure and execute it.
Traditional banking services are provided by Truist Bank, Member FDIC.
Only deposit products are FDIC insured.
Investment and Insurance Products:
• Are not FDIC or any other government agency insured • Are not bank guaranteed • May lose value
Truist, BB&T®, Sterling Capital®, SunTrust®, SunTrust PortfolioView, Truist Securities®, SunTrust Premier Program®, AMC Pinnacle®, AMC Premier®, Access 3®, Signature Advantage Brokerage, Custom Choice Loan®, SunTrust SummitView®, and GFO Advisory Services® are service marks of Truist Financial Corporation. All rights reserved. All other trademarks are the property of their respective owners.
Services provided by the following affiliates of Truist Financial Corporation: Banking products and services, including loans and deposit accounts, are provided by SunTrust Bank and Branch Banking and Trust Company, both now Truist Bank, Member FDIC. Trust and investment management services are provided by SunTrust Bank and Branch Banking and Trust Company, both now Truist Bank, and SunTrust Delaware Trust Company. Securities, brokerage accounts and/or insurance (including annuities) are offered by Truist Investment Services, Inc. (d/b/a SunTrust Investment Services, Inc.) and P.J. Robb Variable Corp., which are SEC registered broker-dealers, members FINRA, SIPC, and a licensed insurance agency where applicable. Investment advisory services are offered by Truist Advisory Services, Inc. (d/b/a SunTrust Advisory Services, Inc.), GFO Advisory Services, LLC, Sterling Capital Management, LLC, Precept Advisory Group, LLC, and BB&T Institutional Investment Advisors, Inc., each SEC registered investment advisers. Sterling Capital Funds are advised by Sterling Capital Management, LLC. Mortgage products and services are offered through SunTrust Mortgage, a tradename for SunTrust Bank now Truist Bank. Life insurance products are offered through Truist Life Insurance Services, a division of Crump Life Insurance Services, Inc., AR license #100103477, a wholly owned subsidiary of Truist Insurance Holdings, Inc.
"Truist Advisors" may be officers and/or associated persons of the following affiliates of Truist Financial Corporation: SunTrust Bank now Truist Bank, our commercial bank, which provides banking, trust and asset management services; Truist Investment Services, Inc., a registered broker-dealer, which is a member of FINRA and SIPC, and a licensed insurance agency, and which provides securities, annuities and life insurance products; Truist Advisory Services, Inc., an SEC registered investment adviser which provides Investment Advisory services.
Comments regarding tax implications are informational only. Truist and its representatives do not provide tax or legal advice. You should consult your individual tax or legal professional before taking any action that may have tax or legal consequences.
Truist Wealth, International Wealth, Center for Family Legacy, Business Owner Specialty Group, Sports and Entertainment Group, and Legal and Medical Specialty Groups are marketing names used by affiliates of Truist Financial Corporation.
Truist Securities is the trade name for the corporate and investment banking services of Truist Financial Corporation and its subsidiaries, including Truist Securities, Inc., member FINRA and SIPC.
Services and products featured herein may include some offered by affiliated companies of BB&T Wealth. The fees for those services and products are in addition to the fees charged by BB&T Wealth. As a result, BB&T Corporation, as a whole, receives more compensation than would otherwise be received if a non-affiliated service or product was used. When we offer any service or product to a client, we use the same process to offer both affiliated and non-affiliated services and products. When we have authority to select any service or product on behalf of a client, if our process shows affiliated services and products to be competitive with corresponding non-affiliated services and products, then we may select affiliated products and services. BB&T Wealth expresses no opinion on the use of BB&T affiliated services and products when the client selects such services and products in a client-directed account.
The information provided should not be considered as tax or legal advice. Please consult with your tax advisor and/or attorney regarding your individual circumstances.
New York City residents: Translation or other language access services may be available. When calling our office regarding collection activity, if you speak a language other than English and need verbal translation services, be sure to inform the representative. A description and translation of commonly-used debt collection terms is available in multiple languages at www.nyc.gov/dca.
Branch Banking and Trust Company is now Truist Bank. Learn more.
BB&T and SunTrust have merged to become Truist. Both institutions will continue to offer independent product lines for a period of time. This may include differing underwriting guidelines, product features, terms, fees and pricing. Our friendly teammates at your local SunTrust branches will be happy to walk you through their respective products. You can also learn more by contacting them at 800-SUNTRUST or SunTrust.com.