In the context of M&A or business/company purchase and sale transaction, the purchase price seems to be based on one of either cash free, debt free basis with working capital adjustment or net asset basis of a company.
Why would a purchaser chose one over the other / what factors would be taken into account in deciding the basis of the business valuation
Isn’t net asset and working capital potentially the same thing?
In: 0
It’s not just up to the buyer. The seller needs to agree to the price as well. The actual selling price is a compromise between what the seller wants and what the buyer is willing to spend, as is with every transaction.
The various calculations are just arguments in a discussion on price. If one calculation makes the company seem more valuable, the seller will likely try to get that calculation considered over the others. The buyer does the opposite. They either reach a compromise or the sale doesn’t go through.
Latest Answers