The valuation vs. market price. What´s the difference?

A market valuation helps determine the company’s worth on the market. Valuing a business is often described both as an art and a science.

Usually, there is a gap between valuation and the market price

It is rather common that owners have a different view of the valuation of their company. It is not a surprise that, in most cases, it’s too high. They have built their value expectations from comparing to known deals with very high valuations.

Determining the value of a company is an intricate activity. Market leadership, lengths, and sizes of customer contracts, a number of own IP’s or patents have all significant impact on the valuation. If you ignore these factors, you may end up having too high expectations.

The more you have interested buyers equals a higher price

Another vital ingredient is how many buyers are seriously interested in your company. Several buyers mean more competition and higher pay. This formula is valid for almost every case. So the critical question is how to attract more buyers?

Advisors and Brokers have their networks and partners to match sellers and buyers to get the best possible deal. However, sometimes the company or business is not attractive, or it is overpriced. In this case, it is essential to make rational decisions if the seller wants the deal to happen. And, if you’re going to make a sensible decision based on the facts, it’s good to have the data from our market evaluation study.

Defining the optimal deal structure may give a significant boost to grow the total value

The deal structure may also have a significant impact on the price. If owners know their business and numbers well, they can optimize the deal structure in a way that they can get a higher price. When this happens, the buyer is usually pleased to pay more because the buyer understands that he or she has less of a risk.

Valuation vs. market price – Are you interested to hear more?

If you are interested in discussing the value of your company, let’s talk. We have access to a database with deal prices that will help in the valuation. Our job is to help you to sell your company with the highest possible market price.


Jarmo Kuusivuori

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