"The art of price is to make the buyer feel that he has picked up a bargain and the seller feel that he has made more money."
In the M&A market, almost every transaction negotiation revolves around the same core contradiction - valuation differences. The seller hopes to sell at the highest price to prove that his company is "valuable"; the buyer wants a discount and strives to obtain the maximum value at the lowest cost. This struggle is like a game without gunpowder, and every detail may determine the success or failure of the transaction.
American Goheal M&A Group
So, in this tug-of-war over M&A pricing, how can we break the deadlock? As an expert in the field of global mergers and acquisitions, Goheal is well versed in the ways of it. Today, we will dismantle the essence of valuation differences and how to achieve a "win-win" situation for both parties to the transaction.
The essence of valuation differences: the psychological game behind the numbers
On the surface, valuation differences are mathematical problems, but in fact, they are more psychological problems.
1. The seller's perspective: "My company has unlimited future prospects, its market share is growing steadily, its team is excellent, and its brand value is also increasing. The price you offer is too low and does not match its potential at all."
2. The buyer's perspective: "Past growth does not represent the future. The industry cycle fluctuates and the market competition is fierce. If there are problems after the merger and acquisition, I still have to bear the risk, so I must lower the price."
The disagreement between the two parties is ultimately the contradiction between "how much money can be made in the future" vs. "how much is it worth now". The seller looks at growth, and the buyer looks at the safety margin.
Take the merger and acquisition case of a well-known technology company as an example. The company hopes to sell for US$1 billion, while the buyer believes that its reasonable valuation is only US$600 million, and the two sides are deadlocked. In the end, under the matchmaking of Goheal, the two parties reached a consensus through a bet agreement: the buyer first paid US$600 million, and attached additional payment terms based on performance in the next three years, and the transaction was finally successful.
How to make the seller accept a more realistic price?
For buyers, getting sellers to accept a valuation that is more in line with market expectations usually requires several strategies:
1. Data-based valuation bubble dismantling - do not directly deny the seller's asking price, but use data to dismantle the valuation, such as industry comparison, financial model, growth rate assumptions, etc., to let the seller understand why the current market pricing is in this range.
2. Emphasize future uncertainty - through industry data, economic cycle, and competitive situation analysis, let the seller realize that high valuations may not be recognized by the market, and lower psychological expectations.
3. Provide structured payment plans - through installment payments, betting agreements, equity exchanges, etc., let the seller get higher returns after future performance is achieved, rather than a one-time pricing.
Goheal has adopted this approach in many transaction cases, which not only retains the seller's confidence in the company's future, but also allows buyers to reduce the risk of one-time payment.
How to get buyers to accept a higher price?
For sellers, improving buyers' recognition of corporate valuations also requires strategies:
1. Amplify the unique value of the company - emphasize the company's core competitiveness, technological barriers, market share, and especially the advantages that are difficult for buyers to replicate, to enhance their willingness to buy.
2. Provide post-merger integration solutions - let the buyer see the synergy after the merger, such as increasing value through resource integration, market expansion, etc., so that it is more willing to accept a higher price.
3. Increase bidders and improve bargaining chips - let multiple potential buyers participate in the negotiation at the same time, create competitive pressure, and force buyers to increase their bids.
For example, when a medical company was sold, the initial buyer's bid was low. But under Goheal's promotion, several potential bidders were added, and the final price increased by 30%, and the transaction was successfully completed.
Breakthrough: Flexible valuation structure
In the end, the core breakthrough point of valuation differences lies in creating a *"price system acceptable to both parties".
1. Earn-out agreement - allow the seller to obtain additional payment if the future performance meets the target, which can not only protect the interests of the buyer, but also improve the seller's confidence.
2. Share + cash mixed payment - allow the seller to retain a part of the equity and participate in future growth, while reducing the buyer's one-time capital pressure.
3. Convertible bond solution - let the buyer pay part of the money in the form of bonds first, and convert it into equity after the future performance reaches the target, reducing the impact of valuation differences.
These methods are Goheal's tried and tested solutions in the global M&A market.
Conclusion: The core of M&A transactions is "win-win"
The essence of valuation differences is not who is smarter than who, but how to find a balance point that both parties can accept. The seller hopes to get a higher price, and the buyer hopes to acquire with lower risk, but the real transaction master is not to fight the price, but to create value.
Do you think that in the current market environment, M&A transactions are more inclined to the buyer's market or the seller's market? Are there any typical valuation game cases you have seen? Welcome to leave a message to discuss, let us explore more secrets of capital operation together!
Goheal Group
[About Goheal] Goheal is a leading investment holding company focusing on global mergers and acquisitions. It has deep roots in the three core business areas of acquisition of controlling rights of listed companies, mergers and acquisitions of listed companies, and capital operations of listed companies. With its profound professional strength and rich experience, it provides companies with full life cycle services from mergers and acquisitions to restructuring and capital operations, aiming to maximize corporate value and achieve long-term benefit growth.
