There are several factors that can positively and negatively affect the value of a business from the point of view of the buyer. Some common factors that add value to a business include:
The organization, including its employees and internal processes
Its reputation in the industry
How well the business fits with the acquiring business, including the culture
Terms of the final deal
How “hot” the industry is and if it’s getting hotter
Overall market conditions
Other intangibles
Timing of the offer
Number of competing offers
When I sold my first business, the payment was to be made in the acquiring company’s public stock. Since it was during the dot com era, stock prices reflected the good market conditions and were on the rise. Also, the acquiring company had a hard deadline for the transaction since it needed to complete the transaction prior to its year-end close. This deadline added value to my business so I began to increase my demands as the closing date got closer.
Therefore, I was able to leverage several factors that enhanced the value of my business from the perspective of the buyer. On the flip side, there are factors that can discount the value of a business from the perspective of the buyer, including:
Employment-related liabilities
Environmental liabilities
Litigation liabilities
Tax liabilities
Product warranty liabilities
Contract liabilities
Duress by sellers such as health or monetary issues
Lack of time to complete the deal on the part of the seller
Not using an intermediary to remove emotions
Coming to an agreement too quickly/easily
Only one offer
Overall seller naïvety since a buyer may buy many businesses while a seller often only sells a business once
