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M&A Letter of Intent: Valuation and Deal Structure
M&A Valuation: Measures of Return

The Importance of the M&A Valuation Range

To help create a visual of the importance of the M&A valuation range, imagine a dog. Specifically, a retrieving-mad Labrador retriever. Hold up a tennis ball in front of said retriever and shake your hand to generate enough movement to capture the dog’s attention.

After the dog spies the tennis ball he wants only one thing in the world: THE BALL! If you throw the ball, the dog will chase it pell-mell, running through bushes and thorns and sniffing and snuffing until he finds it.

Sellers kind of have the same approach when it comes to the valuation range in indications of interest. In fact, you can say they’re valuation-mad valuation seekers. They tear through the indication with total disregard for the rest of the information until they find that one prized nugget.

For first-time Sellers, seeing the valuation range is often anticlimactic. Even if the range is favorable, it’s just a simple line that essentially says, “We offer to pay between $X million and $Y million.”

This quick sentence can be a bit disconcerting because Seller immediately flashes back to all the hard work and toil she put in over the years and suddenly realizes that they’ve been distilled into a dispassionate range of numbers.

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