For acquisition pricing, value is in the eye of the beholder

When arriving at the terms of a merger or acquisition, third party avenues exist for executives to evaluate the sticker price of a company. However, experts say that the ultimate price a larger company pays for a smaller firm comes down to less objective metrics.
"Value is in the eye of the beholder," explains Carolyn Brown in a blog post for Inc. Magazine. "Generally speaking, market value is one indicator. Other price factors are capitalization of earnings, discounted cash flow, and net return of assets or equity. But you also want to consider strategic value, meaning, what is the projected earnings stream under the proposed new ownership. Look at assets such as customer lists, brands, intellectual property, and licenses."
The speculative value of a corporate property can far exceed its standalone value in the marketplace. For example, if your company can realistically leverage the expertise and development of its new property to boost profits on a larger scale, that value might not be reflected in third-party assessments. Brown insists that it's important not to over-pay, but when acquisitions become competitive, companies need to do a great deal of thinking about how high they're willing to bid.
Sometimes the best way to address the subject of value in an acquisition strategy is with a persuasive proposal. Considering the ultimate benefits of absorbing the smaller firm and quantifying them to the best of your ability can win startup executives over. It's also important to remember the emotional component of a merger or acquisition. Often, startup owners aren't looking for the best financial deal on its own. Instead, they're looking for the acquiring company that will facilitate the most growth for the startup's primary objectives.