Why the same business has a different value for every buyer – and what KFS/BW 1 (the Austrian professional standard for business valuation) says about it.
One business, several prices.
A strategic buyer saves on purchasing, uses its sales network and merges administration. A financial investor cannot do any of that.
Offers therefore often lie far apart.
Which synergies belong in the value of the business?
Definition: Synergies are positive or negative changes in the financial surpluses resulting from combining businesses (KFS/BW 1, margin no. (Rz) 126).
Market value: typical synergies only.
For market value, the typical buyer counts – not the one interested party:
- Typical buyers – only synergies that several market participants could realise (Rz 142)
- Reflected in the price – only to the extent that they would be paid for in the purchase price (Rz 142)
- No special buyer – advantages specific to a particular acquirer are left out (Rz 20, 142)
Disclosure: The amount, scope of effect and assumed compensation in the purchase price belong in the expert opinion (Rz 142).
Buyer’s perspective: all of its own synergies.
The typified subjective value shows what the business is worth to a specific buyer:
- All synergies – positive and negative, arising from the specific transaction (Rz 153)
- Also on the buyer’s side – effects within the acquirer’s own business count as well (Rz 153)
- Comprehensible – the expectations must be plausible to third parties (Rz 150)
For the negotiation: Whether specific synergies are passed on to the seller is decided in the negotiation – not in the valuation.
Often overlooked: the flip side.
Integration costs
Combining businesses costs money. Integration costs and the duration of the synergies must be disclosed in the expert opinion (Rz 128, 153).
Negative synergies
Customers leaving or duplicated structures reduce value – they count too (Rz 126, 153).
Anyone paying for synergies should know when they take effect – and what they cost.
From our engagements: business acquisition by management buy-out
Manufacturing company, Upper Austria: valuation of a medium-sized manufacturing business in the context of a management buy-out. Expert opinion in accordance with KFS/BW 1 as a basis for negotiation between the previous owner and the management.
Expert opinion accepted as basis for negotiation
Anonymised example – discretion is our highest priority.
Are you buying or selling a business?
Market value, buyer’s perspective, synergies – in a free initial consultation, we clarify which valuation your situation requires.