Yes, value informs price, but it is not the only influencer.

Price is usually the most difficult hurdle for buyers and sellers to overcome. The value of a business is different for each party participating in a transaction and is based on opinion and the specific set of circumstances for each individual. Price, on the other hand, is the number at which the transaction is executed.

Yes, value informs price, but it is not the only influencer. Price is also the result of negotiations between buyer and seller. While negotiation does not necessarily impact each party’s perception of value, it allows for dialogue so that both sides arrive at a price where the value for each individual overlaps and a mutually beneficial deal can be struck. 

In this article, Price, Not Value, Is a Product of Negotiation, explores why determining value is an important foundation of transaction negotiations, and demonstrates why other factors like demand, fit, and acquired efficiencies affect the final purchase price of your business.

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This article was originally published in our 2019 Trends in Transactions and Valuation M&A Report.

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