ame thing as building an excellent organization.

However, equally important to me is the recognition that there must be an excellent cultural and organizational "fit" in order for any acquisition to succeed. By “fit”, I simply mean a similar set of values and practices regarding the actual running of an ongoing business: business ethics, work styles, work ethics, a vision for the future, perpetuation objectives, leadership styles, and so on. It is the valuation of the non-financial metrics described in the last t

Over the years I have had the benefit of watching the acquisitions process from many different perspectives. I have been a principal of a company being acquired as well as a principal of a company conducting acquisitions. I have also served as an executive working on both acquisitions and dispositions teams and as a professional advisor representing both the buy-side and the sell-side. Having sat on all sides of the acquisition table it has been my experience that regardless of approach, style, timing, culture, synergy, supply or demand drivers, or any other catalyzing factor the transaction will eventually boil down to valuation metrics.

When I’m on the buy-side of the table I’m looking to drive down valuations to make accretive purchases that provide a solid return on investment. When I’m on the sell-side of the table I attempt to secure the highest valuation possible in order to maximize my return on equity. It is easy to see and to understand the divergent interests in play between buyer and seller. Thus when both the buy-side and sell-side parties are in alignment on valuation metrics and philosophy the transaction in play will have a certainty of execution that does not exist when there is either a philosophical gap or a large pricing delta between the bid and the ask.

Regardless of which side of the table you sit on the best way to close a gap in valuation is not by continuing to hammer on the financial metrics in a vacuum, but to rather use non-financial metrics to justify movement in valuation pricing.

While I have always placed a strong emphasis on valuation, I perhaps place an even greater emphasis on the quality of the employees, the client base, the product and service mix, the reputation of the business within the market place, the character of management and the integrity of the management process, current trends and future forecasts of the competitive landscape etc. Acquiring a large revenue stream that is also a poorly run organization simply results in a much "larger" headache. Simply put, building critical mass is not the same thing as building an excellent organization.

However, equally important to me is the recognition that there must be an excellent cultural and organizational "fit" in order for any acquisition to succeed. By “fit”, I simply mean a similar set of values and practices regarding the actual running of an ongoing business: business ethics, work styles, work ethics, a vision for the future, perpetuation objectives, leadership styles, and so on. It is the valuation of the non-financial metrics described in the last t

, supply or demand drivers, or any other catalyzing factor the transaction will eventually boil down to valuation metrics.

When I’m on the buy-side of the table I’m looking to drive down valuations to make accretive purchases that provide a solid return on investment. When I’m on the sell-side of the table I attempt to secure the highest valuation possible in order to maximize my return on equity. It is easy to see and to understand the divergent interests in play between buyer and seller. Thus when both the buy-side and sell-side parties are in alignment on valuation metrics and philosophy the transaction in play will have a certainty of execution that does not exist when there is either a philosophical gap or a large pricing delta between the bid and the ask.

Regardless of which side of the table you sit on the best way to close a gap in valuation is not by continuing to hammer on the financial metrics in a vacuum, but to rather use non-financial metrics to justify movement in valuation pricing.

While I have always placed a strong emphasis on valuation, I perhaps place an even greater emphasis on the quality of the employees, the client base, the product and service mix, the reputation of the business within the market place, the character of management and the integrity of the management process, current trends and future forecasts of the competitive landscape etc. Acquiring a large revenue stream that is also a poorly run organization simply results in a much "larger" headache. Simply put, building critical mass is not the same thing as building an excellent organization.

However, equally important to me is the recognition that there must be an excellent cultural and organizational "fit" in order for any acquisition to succeed. By “fit”, I simply mean a similar set of values and practices regarding the actual running of an ongoing business: business ethics, work styles, work ethics, a vision for the future, perpetuation objectives, leadership styles, and so on. It is the valuation of the non-financial metrics described in the last t

side and sell-side parties are in alignment on valuation metrics and philosophy the transaction in play will have a certainty of execution that does not exist when there is either a philosophical gap or a large pricing delta between the bid and the ask.

Regardless of which side of the table you sit on the best way to close a gap in valuation is not by continuing to hammer on the financial metrics in a vacuum, but to rather use non-financial metrics to justify movement in valuation pricing.

While I have always placed a strong emphasis on valuation, I perhaps place an even greater emphasis on the quality of the employees, the client base, the product and service mix, the reputation of the business within the market place, the character of management and the integrity of the management process, current trends and future forecasts of the competitive landscape etc. Acquiring a large revenue stream that is also a poorly run organization simply results in a much "larger" headache. Simply put, building critical mass is not the same thing as building an excellent organization.

However, equally important to me is the recognition that there must be an excellent cultural and organizational "fit" in order for any acquisition to succeed. By “fit”, I simply mean a similar set of values and practices regarding the actual running of an ongoing business: business ethics, work styles, work ethics, a vision for the future, perpetuation objectives, leadership styles, and so on. It is the valuation of the non-financial metrics described in the last t

ys placed a strong emphasis on valuation, I perhaps place an even greater emphasis on the quality of the employees, the client base, the product and service mix, the reputation of the business within the market place, the character of management and the integrity of the management process, current trends and future forecasts of the competitive landscape etc. Acquiring a large revenue stream that is also a poorly run organization simply results in a much "larger" headache. Simply put, building critical mass is not the same thing as building an excellent organization.

However, equally important to me is the recognition that there must be an excellent cultural and organizational "fit" in order for any acquisition to succeed. By “fit”, I simply mean a similar set of values and practices regarding the actual running of an ongoing business: business ethics, work styles, work ethics, a vision for the future, perpetuation objectives, leadership styles, and so on. It is the valuation of the non-financial metrics described in the last t

ame thing as building an excellent organization.

However, equally important to me is the recognition that there must be an excellent cultural and organizational "fit" in order for any acquisition to succeed. By “fit”, I simply mean a similar set of values and practices regarding the actual running of an ongoing business: business ethics, work styles, work ethics, a vision for the future, perpetuation objectives, leadership styles, and so on. It is the valuation of the non-financial metrics described in the last two paragraphs that should be the major influencing factors in your decisioning behind the justification of the final valuation.

Now that we’ve discussed the major influencing factors behind how to negotiate movement in valuation I want to give you an overview of what I believe is the “right” way to arrive at the “right” number to begin with. There is an abundance of available data on common industry rules of thumb concerning “multiples” that can be used to estimate the value of a business. However, while multiples may be useful in providing an immediate ballpark of a business’s value, they do not substitute for a more comprehensive valuation approach. Multiples are shortcuts to value based upon the simplification of more in-depth valuation methodologies. The use of multiples as the primary valuation methodology is equivalent to the business plan that is written on the back of a napkin. This is primarily true because no understanding of the data underlying the multiples has been performed, and thus neither the data integrity nor comparability with the subject business can be evaluated.

Valuation multiples provide a rough guideline for the price of the average business in a particular industry, but without due consideration given to the unique attributes of an individual business, geographic location(s), current competitive landscape, current economic environment, etc.

I have always believed in providing open, honest, fair and full disclosure of how I value an organization. In order to insure that both buyer and seller model a transaction that is fair to all parties and economically viable going forward I developed a blended valuation approach that takes into account a variety of valuation methods that is weighted to the unique circumstances of a the particular business and the market timing of the transaction. I have successfully used this algorithmic valuation methodology to establish a fair price for a business. The following inputs are a representative sampling of some of the factors that we weight in our calculations:

Pre-tax Cost of