Deal Structure Valuation
Your Deal Terms Matter More
Than the Price
Simplified Presentations Close Deals.
When preparing for selling or buying a business, the vast majority focus on the selling price, and miss the financing and deal costs. Additional steps are needed starting with a robust deal and financing terms analysis.
A CFO study showed 60% over paid for deals and 40% were overvalued. In addition, 80% made 15 deal mistakes (yes all 15). Each directs the need for a strong valuation with a Price Driver Variance, PDVSM testing, and a process with a Deal Risk Analysis, DRASM. Both of these can be independent of a valuation as a part of transaction deal preplanning.
Why the deal must work right. 90% of companies sold are financed. Overlooking the financing period hazards is dangerous to your wealth. Business valuations ignore five deal financing period risks.
Deals work or they don’t. The risks of failure are big and frequent. The key is to do your best homework before inking the deal.
Deal Structure Valuation, DSVSM covers the deal’s complex financing process from closing to final payment. Your deal is over only when all terms are met and the last installment check clears. Only 10% of sellers are happy with their sale. Between the deal’s start and finish are many chances for the deal to fail. And, many DO fail. The reason for failure is a bad start.
This is why we built the Deal Structure Valuation, DSVSM to give you a valuation validity rating, and an optional warning on up to fifteen top deal risks noted earlier.
Deal Valuation Report Sample shows the expense categories and the comparison calculations you can DIY by following the process; or we can help you define and gather the data for a tighter calculation using our advance technology.
The Deal Structure Valuation, DSVSM answers five critical questions that we will go through at our initial meeting. Click to start assessing your transaction's risks.
Structure Your Business Transaction
Right for Success
The PRICE is right only when the DEAL works.
You spend plenty of time and money to put a price on your company, and put it on the market. After the valuation, comes the deal offer. The “offering price” is meaningless to you if your deal terms miss your money and risk goals.
You will never get the initial offering price. The offer is to persuade you to release information and start negotiations. Selling is a complicated process that you must understand to make work for you. An expert guide is a critical firs step in preparing to sell you company.
We stress with clients your top goal is to fully understand the financial and operating consequences of taking an offer. The DSVSM brings balance to your deal process price and terms. Before you seal the deal, you learn key facts about why the deal terms will work, or will not.
Your company’s sale price only matters when your deal works for both seller and buyer. The smart and successful business seller accepts ‘deal terms’ that work for all stakeholders. This doesn’t mean ignore the price. The DSVSM approach makes the pieces fit the parties in the puzzle. You see the whole picture of the deal’s terms.
When the terms fit, the deal closes. For the business seller, being paid is as important as price. For the buyer, you must get what you paid for. Going the distance from closing to the last payment takes serious organization, patience and forethought.
The Deal Structure Valuation, DSVSM is a smart money ‘sanity check’ for scenarios to call a deal ‘go or no go.’ DSVSM verifies the deal’s required cash flow and valuation results. The analysis covers the connections between the 12 complex deal drivers. You can DIY the data for input, or you have consulting help to set each factor.
Client comments: “Wow, we just dodged a bullet!” “We aren’t as ready as we thought.” “That’s proof the valuation is flat wrong.” “We’d better do more homework before going back to the table.” “Something’s not right, let’s check our due diligence.” “Now I understand why the terms drive the deal, not price.”
The Deal Structure Valuation, DSVSM answers critical questions.
Will the company’s cash flow set in the valuation cover the five expense categories? Your deal only works when you can say confidently “yes” to all. See the sample report linked earlier for the expense descriptions.
Whether you are looking for a business to buy or looking at selling your business, your success depends upon both sides agreeing to the deal.
Ample due diligence applies to the company’s industry, operations, and the deal and it’s financing. Having an objective reference of key deal parameters available during negotiations helps all parties focus on working out a successful business purchase.
Think About Analyzing Your Financial Risks
Day-to-day pressures sometimes persuades management to let hunches direct planning. However, knowing your numbers before you jump makes for a happier and safer landing.
Our Financial Risk Analysis, FRASM looks at five years of your financial performance, compares your numbers to similar companies, then assesses and identifies your risk areas and tells you their trends, positive or negative. Once identified, you can fix the negative factors.
You may need a higher line of credit for expansion. You may be planning to sell in a couple of years. Controlling financial risks are part of a prudent plan.
Identifying your financial risks gives management the foundation to build performance controls into operations. Contact us about your unique situation.