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How to optimise pricing when planning for exit

This article, co-authored by Simon Pearson, Anna Faelten and Helen Jones, discusses how investors would typically approach valuation and techniques to optimise pricing once a sale process has begun. 

For many founders seeking an exit, valuation is one of the most important factors influencing their decision to sell. But what’s the difference between valuation and pricing?

“Price is what you pay. Value is what you get,” said Warren Buffett.

Buyers will consider valuation using a range of methodologies such as M&A and listed peer multiple analysis, Discounted Cash Flow (DCF) and Leveraged Buyout (LBO). The output of the analysis is a rational approach to reaching a price based on the value to the buyer.

Pricing is what a buyer is willing to pay for an asset which is often not rational and as a result can vary significantly from a technical valuation.  Buyers should always stick to their walk-away price based on valuation analysis but often do not. ...