So how much is it worth; valuation versus value?
Although both methods use the same reference data and terminology, there is a difference between a formal valuation and the M&A transaction value of a Company. These variations can most simply be thought of as: formal valuations value entities that own businesses and M&A bankers value businesses.
The formal valuation tends to be the approach used by the buy-side of a transaction; the use of simple multiples, Discounted Cash Flow (DCF), Lending Test Approach (LBO Method), appraisal of key assets and real property appraisals.
M&A value is determined in the context of an economic asset; what will the business return be to the acquirer. The investment value is found in the people, timing, company specifics, industry specifics and strategic fit.
A skilled M&A professional should have the ability to contrast the two different but related approaches in market transactions. A proper determination of the Investment Value of your Company will help to identify the best buyers, and enable the sell-side team to articulate a compelling business case for acquisition. Understandably, the best buyers are those who are willing to pay the highest price, because the acquisition will add the greatest Value.