One of the more important services that the investment banker provides is to render an opinion of the value of the corporate enterprise. A number of techniques are utilized to determine the value of the company. No single methodology is universally applicable in determining the fair market value of a business. A complete and objective business valuation that compares a number of methods is generally the starting point for sellers and buyers of on-going businesses. It is important to note that accurate data on market valuations of private companies and private company M&A transactions are often illusory or not published. It is critical, therefore, to establish quantitative assessments of value from an experienced investment banking firm or a valuation firm. These estimates should be consistent with realistic shareholder expectations.
Most investment bankers will not prejudice the counterparty with a specified valuation, given that synergies and valuation metrics of the buyer are generally not known.
Armed with a professional opinion of value using several different analyses will give the shareholders a better understanding of the merits of offers that may be received from buyers. In the final analysis, it is the market that will dictate the value; i.e. the price and terms that a business will transfer between a willing buyer and seller when neither is under any compulsion to buy or sell, and both parties have access to all relevant facts and understanding of the business being sold.
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