top of page

The Value Versus the Sale Price of a Company

Posted in Minuta Empresarial on El Nuevo Día, Monday, October 3, 2022

Written by: Jesús Daniel Mattei, CFA Rockelis Partners

 

The price of a product or service is black and white: a liter of milk costs so much and that's it.

So how much is your business worth? It's here that the price of a good versus its value is considered.


Acclaimed investor Warren Buffet explains it well, "price is what you pay, value is what you receive." Value is subjective: the same thing can have a different value for different people, times or situations. Thus, when one party in a buy and sell transaction has an interest in acquiring a company and the other party has an interest in selling it, each party attributes a certain value to it by applying different valuation techniques; the potential to generate cash, wealth and long-term value creation is also considered.


The price, on the other hand, is objective, the result of the agreement between the buyer and seller. In a valuation process, the value of the company is estimated as an objective reference point to inform the decision making. Usually, companies are valued by responding, for example, to a search for investors, financing or the moment to make an acquisition or merger. The value of a company is also calculated for legal and contributory applications.


In addition, there are concepts and foundations to calculate the value of a company according to the type of the sector in which it operates. Therefore, it is necessary to consult an expert advisor who develops a strategic plan based on a carefully curated analysis.








11 views0 comments

Recent Posts

See All

Your Exit is Someone Else’s Beginning

When considering who will own your business after you, it is critically important that you are able to see that your future owner will face the same challenges that you face and will be looking for th

Comments


bottom of page