During a merger or acquisition process, organizations need professionals like Guynn to protect their interests and ensure that the final deal is fair. One of the most contentious factors during a merger or acquisition is valuation, since the acquiring entity wants to minimize the valuation while the company to be acquired wishes to maximize it.
Traditionally, mergers and acquisitions involve valuations that compare companies to other, similar companies in the industry. Sometimes, however, no comparable companies exist. For this reason or others, companies may opt for alternate types of valuation, such as comparative ratios. These include price-to-earnings ratios and enterprise-value-to-sales ratios. Another key valuation is the discounted cash flow, or DCR, which estimates value based on expected future cash flows. Some acquisitions may involve a replacement cost valuation, which looks at the total costs entailed in replacing the company. If the target company does not sell for this price, the acquiring entity can then opt to set up a competitor.