What It’s Worth

The valuation of a company discussed in an M/A transaction can vary widely.

Although sophisticated models and rules-of-thumb can be used to calculate the valuation or value of companies involved in a merger or acquisition, the reality is that the collective opinions of others determine company values.  For publicly traded companies, the common method is to rely on market capitalization to determine a company’s value.  For privately held companies, determining its value is nowhere near as clear.  In fact, very wide discrepancies are common, which can short-circuit a transaction quickly and permanently.