How to Bridge Valuation Gaps in M&A
John Blair, Partner M&A Attorney at K&L Gates
In M&A, it’s very common for buyers and sellers to disagree on the value of the business. If both parties cannot agree on the price, the deal could fall apart. However there are certain strategies and tools that both parties can use to compromise and be happy during closing.
In this episode of the M&A Science Podcast, John Blair, Partner M&A Attorney at K&L Gates, shares best practices on how to bridge valuation gaps in M&A.
Things you will learn in this episode:
•Bridging gaps in M&A Valuation
•Earnouts
•Seller Financing
•Equity structure
•Market’s impact on Bridging M&A Valuation Gaps
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Episode Bookmarks
00:00 Intro
04:13 When to get involved in the M&A Process
07:50 Negotiations during LOI
09:42 Bridging gaps in M&A Valuation
11:09 Using Holdbacks to Bridge M&A Valuation Gaps
13:20 Seller Financing
15:00 Earnouts
16:43 Earnouts on Intellectual Property
18:45 Key Variables in an Earnout
23:14 Earnout payment structure
25:53 Making Earnouts Successful
29:08 Structures of Seller Financing
36:24 Traditional terms of seller financing
38:20 Equity structure
41:04 Stock options
43:52 Minimizing the cash upfront during a sale
46:34 Contents of Letter of Intent
49:14 Advice for first timers
50:01 Craziest Thing in M&A