What Happens in an M&A Valuation (and What Slows It Down)

M&A Valuation: Different from Standalone

Valuing a company for M&A differs from standalone valuation. Buyers care about synergies, strategic fit, and integration costs, not just intrinsic value.

The M&A Valuation Process

Phase 1: Initial Valuation Range

Before serious discussions, buyers establish a range based on:

• Public comparables and precedent transactions
• High-level financial analysis
• Strategic value assessment

This sets expectations for early negotiations.

Phase 2: Due Diligence Deep Dive

Once under LOI, detailed valuation work begins:

• Quality of earnings analysis
• Customer contract review
• Technology assessment
• Team evaluation
• Synergy modeling

Phase 3: Final Price Negotiation

Findings from diligence inform final price, including:

• Adjustments for discovered issues
• Working capital targets
• Earnout structures for bridging gaps

What Drives M&A Valuation

Strategic Premium

Buyers pay above standalone value for:

• Market access (new geographies, segments)
• Technology acquisition (buy vs. build)
• Team acquisition (acqui-hires)
• Competitive elimination

Synergies

Revenue synergies (cross-sell, upsell) and cost synergies (eliminate redundancy) can justify premium pricing.

Scarcity Value

If multiple buyers want the asset, competition drives price up. Proprietary deals often close at lower multiples.

What Slows Down M&A Valuations

Data Room Issues

Missing documents, inconsistent financials, and unorganized data rooms add weeks.

Fix: Prepare your data room before going to market.

Customer Concentration

Heavy reliance on few customers triggers deep dives and sometimes price adjustments.

Messy Cap Tables

Complex ownership structures with unclear terms delay closing.

Unexpected Liabilities

Undisclosed obligations, pending litigation, or IP issues discovered in diligence.

Next Steps

Considering a sale or acquisition? Book a call to discuss how to prepare for the valuation process.