Valuation is a critical element in the M&A process and will need to be revisited multiple times throughout the process.
- In a buyside scenario the initial valuation will be done based on publicly available information on the target which may be limited in the case of private companies or subsidiaries within larger organizations. Once the parties have agreed on certain key transaction terms the due diligence phase begins during which the target provides more detailed financial information. In addition the acquiror should be able to determine possible synergies.
- In a sellside scenario the valuation of the business to be sold will be based on the business plan which will be thoroughly tested and evaluated as it needs to be able to withstand critical questions from potential buyers.
Valuation methodologies usually include public comparables, transaction comparables and discounted cash flow analysis.
Any results from the due diligence process which may have an impact on the valuation will be considered and reflected in the valuation if appropriate.