Valuing and Structuring Private M&A Deals

Got something to say to this podcast? Send a voicemail, and you might hear yourself on the next episode! Valuing and structuring acquisitions involving privately held companies requires navigating unique challenges such as limited financial transparency, informal governance, and owner-driven earnings adjustments. Because private firms lack public market prices, appraisers must meticulously clean financial statements, apply customized discount rates for undiversified owners, and incorporate appropriate control premiums and illiquidity discounts. Once a baseline valuation is established, negotiators bridge price disagreements and manage uncertainty by utilizing creative payment structures like earn-outs, contingent value rights (CVRs), and stock collars. Furthermore, choosing the correct legal format—such as purchasing assets, buying stock, or executing a merger—directly dictates how tax liabilities, transferred debts, and shareholder voting requirements are handled. Ultimately, every component of a deal structure is deeply interconnected, meaning that shifting risk in one area will inevitably impact another throughout the negotiation process.