When valuing target companies, carefully scrutinizing the assumptions that go into creating valuation models is equally as important as, if not more important than, “crunching the numbers.” While valuation is about numbers, because of the tendency for management to overpay for companies they buy, this chapter focuses on behaviors more than numbers, while providing an overview of commonly used valuation techniques. This chapter addresses why buyers overpay, the damaged caused by overpayment, key predictors of overpayment, enterprise versus equity value, accretive versus dilutive acquisitions, and fairness opinions. The tools, templates, best practices, potential pitfalls, and a case example of how to produce a realistic valuation are also addressed, along with the main participants, core activities, buyer’s and seller’s perspectives, and key cross-border considerations.
Fairness opinions in mergers and acquisitions
