Chapter 21
Ten Possible Ways to Solve Valuation Differences
IN THIS CHAPTER
Exploring ideas for earn-outs
Looking at ways to provide consideration other than cash at closing
Valuation is always the million-dollar question — well, often the multimillion-dollar question. The stereotypical negotiation impasse has Seller asking for a high price and Buyer offering a low price, with each side digging in their heels and insisting that the other side totally capitulate to their demands. But that strategy rarely results in a closed deal.
In the spirit of getting deals done, in this chapter I provide a few ideas on ways Buyers and Sellers can settle valuation disagreements and move forward to a closing.
Payments over Time
If Seller wants a certain price for the company, Buyer may be willing to pay that price over a period of time. Buyer has the benefit of the time value of money (today’s dollars are worth more than tomorrow’s dollars, so paying today’s debts with tomorrow’s dollars is a benefit to Buyer), and Seller gets to tell everyone that he was able to get the valuation he wanted.
If Seller agrees to accept payments over time, I suggest using a note to officially and legally document ...
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