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Practitioner's Complete Guide to M&As: An All-Inclusive Reference, with Website by David T. Emott

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Topic 67

Negotiation: Values, Offers, Prices, and Risk Assumption

It is important to keep the relationships among valuation, structure, prices, offers, and assumed risk (elements of total consideration) in mind as you initiate and proceed through a transaction. Topic 67 explores these relationships along the buyer's desired total consideration frontier versus the acceptable total consideration and the actual total consideration frontier.

The reader is encouraged to take the time to read the text in conjunction with the referenced Appendices to gain the appropriate level of understanding of the subject matter discussed in the narrative. Appendices are either presented at the end of this and each remaining Topic or are available for review and download on this book's companion Web site (see the About the Web Site page for login information).

DRIVERS OF THE DESIRED AND ACCEPTABLE TOTAL CONSIDERATION FRONTIER

  • It is critical to understand the relationships among values and value determination, offers, target and final prices, and total consideration paid when going into and proceeding through a transaction.
  • Appendices 67.1 through 67.4 illustrate the relationships between a buyer's total target consideration, composed of target value and risk assumption, offer price, negotiated purchase price, and ultimately realized actual total consideration including risk assumption.
  • Appendix 67.1 shows the “desired total consideration frontier” along line DG and “acceptable total consideration ...

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