Determining the purchase price for company acquisitions

The importance of determining the purchase price in MA transactions

The company valuation to determine the purchase price is not just a matter of figures. It serves as a compass that shows the way through complex negotiations. Buyers want to ensure that they are paying a fair price for the company that takes into account both current and potential future value drivers. Sellers, on the other hand, strive to achieve the best possible sales price that reflects the true value of their company.

The key to a successful MA company acquisition therefore lies in careful data analysis and a well-founded company valuation. Otherwise, there is a risk that transactions will fail or that one of the parties involved will suffer a financial disadvantage. As buy-side MA advisors, we accompany the entire process and ensure that both buyer and seller achieve their goals.

The path to an appropriate purchase price

The following steps should be taken to determine the appropriate purchase price:

1. Selection of the valuation method: depending on the type of company, the industry and the available data.
2. Data analysis scenario development: Careful analysis of all relevant data, including financial figures, market conditions and strategic positioning of the company.
3. Consideration of synergies: potential synergies arising from the transaction should be factored into the valuation to maximise the overall value for the buyer.
4. Risk assessment: identification and quantification of potential risks that could impact the value of the business.
5. Negotiations: Entering negotiations based on the valuation results to achieve a fair and reasonable purchase price.

Challenges and pitfalls in determining the purchase price company acquisition

There are a number of challenges when valuing the target company. These include:

• Data quality: The accuracy of the valuation depends largely on the quality of the underlying data. Missing or inaccurate information can lead to incorrect results.
• Future forecasts: The DCF method and other forward-looking valuation approaches are heavily dependent on forecasts. Uncertainties regarding market conditions, the competitive environment or technological developments can have a significant impact on the valuation.
• Subjectivity: Despite all efforts to be objective, certain assumptions and judgements can be subjective. However, MA advisors work to minimise this subjectivity through sound analyses.

Benefit from our many years of experience in determining the purchase price for company acquisitions

With our systematic approach, pragmatic solution finding and early anticipation of deal breakers, we regularly make a decisive contribution to making deals a success. Transparent communication with the buyer and a close dialogue with the seller are crucial in order to enter the final phases of negotiation and deal closing with a well-founded and reliable offer price. Any discussions that arise and one-sided emotions can thus be objectively moderated and dispelled.

• Objectivity and independence: we offer an unbiased view of the company value, which is particularly advantageous in negotiation situations. They help to avoid emotional decisions and focus on the facts.
• Extensive market knowledge: as MA advisors, we have a deep insight into current market trends and can incorporate this information into the valuation. They know which factors influence the market value of a company and how these can be integrated into the valuation.
• Experience in negotiations: we not only support you in the valuation, but also in the subsequent negotiations. You can act as a mediator to ensure that both sides accept a fair and reasonable purchase price.
• Risk management: A precise valuation enables potential risks to be recognised and addressed at an early stage. We help to quantify these risks and incorporate them into the pricing.