How to Bridge Valuation Gaps in M&A

M&A Science

John Blair, Partner M&A Attorney at K&L Gates

In M&A, it’s very common for buyers and sellers to disagree on the value of the business. If both parties cannot agree on the price, the deal could fall apart. However there are certain strategies and tools that both parties can use to compromise and be happy during closing.

In this episode of the M&A Science Podcast, John Blair, Partner M&A Attorney at K&L Gates, shares best practices on how to bridge valuation gaps in M&A.

Things you will learn in this episode:

•Bridging gaps in M&A Valuation

•Earnouts

•Seller Financing

•Equity structure

•Market’s impact on Bridging M&A Valuation Gaps

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Episode Bookmarks

00:00 Intro

04:13 When to get involved in the M&A Process

07:50 Negotiations during LOI

09:42 Bridging gaps in M&A Valuation

11:09 Using Holdbacks to Bridge M&A Valuation Gaps

13:20 Seller Financing

15:00 Earnouts

16:43 Earnouts on Intellectual Property

18:45 Key Variables in an Earnout

23:14 Earnout payment structure

25:53 Making Earnouts Successful

29:08 Structures of Seller Financing

36:24 Traditional terms of seller financing

38:20 Equity structure

41:04 Stock options

43:52 Minimizing the cash upfront during a sale

46:34 Contents of Letter of Intent

49:14 Advice for first timers

50:01 Craziest Thing in M&A