Acquisitions

An acquisition makes sense for buyer and seller when the price that the buyer pays is less than the value the buyer gets but more than the value that the seller currently believes it is worth.

It’s as simple as that.

Seller Valuation < Price < Buyer Valuation

When that happens, the buyer wins and the seller wins so you just haggle over the middle-ground.

Sidenote: What fascinates me is when the disparity between buyer and seller valuations is so large that the middle ground price feels like a massive win to both sides. What irks me is that most of the deals that we see (I’m on the buy side) is that the seller valuation is multiple times higher than the buyer valuation. Either it’s a problem with us and we can’t unlock the value, or normally it’s that the seller has an unrealistic expectation of some mystical buyer’s ability to extract value out of it.