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Mergers and Acquisitions from A to Z, 3rd Edition by Andrew J. SHERMAN

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CHAPTER 8

Valuation and Pricing of the Seller’s Company

Price is the paramount issue in a merger and acquisition transaction. Beyond anything else, it determines the amount of value that is transferred to the seller in exchange for ownership of the business that is for sale. It is the number one concern for both buyers and sellers, and it ultimately determines whether or not a transaction can be consummated. It is also always critical to distinguish between price and terms. The price could be very favorable to a seller but be crippled by alternative terms that make the transaction unpalatable, costly, and risky. There are several established and traditional valuation methods used to estimate the price range within which a business will be sold. ...

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