Dr. John Psarouthakis, Founder and former CEO, JPIndusries,Inc., a Fortune 500 industrial corporation. Publisher of www.BusinessThinker.com
Before you can begin final negotiations on price, you need to determine the value of the company. You can use several techniques to value a company. We recommend the discounted cash flow value approach as the most accurate method although other approaches are useful in preliminary stages of your search to give you a sense of the range of the estimated price.
Timing and Scope of the Valuation Process
An initial calculation of valuation can be done on a fairly mechanical basis, based on information provided to you by the seller using established formulae and guidelines. However, determining the accuracy of the financial data that the seller provides you is an on-going part of the evaluation process that should take place throughout preliminary and formal due diligence up to the closing. Thus valuation takes place along with negotiations throughout the deal-making process. One of the key objectives of due diligence is to surface any information that might affect the accurate valuation of the company. If your team does not have a financial auditor you should hire one to verify the accuracy of the historical data.
Dr. John Psarouthakis, Executive Editor, www.BusinessThinker.com
Founder and former CEO, JPIndustries, Inc., a Fortune 500 industrial group
We have been in the midst of a fundamental and historic shift of how the economies around the world develop. With the collapse of the centralized and state control model of the economy what we have now, however, imperfect it maybe, is the model of the “Free Market.”
This shift is occurring in parallel with two other sociopolitical expressions:
- Smaller government, though the last few years this seems not to have been happening.
- The need, indeed the demand by our society to provide assistance, protection, and distribution of economic benefits in a “fair” way
What we are witnessing is a major shift on “how we can fulfill our expectations of a humanistic society” while we keep the state’s interventions and control power at minimum.
Business Strategy, Decisive Management, and Success
An Article Written for the Euro-Horizon Magazine
By Dr. John Psarouthakis
Founder and President, JPManagementCenter, llc
Adj. Professor of Business Administration (ret.), School of Business, University of Michigan, and Sr. Lecturer (ret.), Mechanical Engineering, MIT. Founder and former CEO, JPIndustries,Inc., a Fortune 500 industrial Group.
Plato, many centuries ago, said, “Nothing endures but change itself”. What is different in our era is not the presence of change but its pace–the rapidity with which ideas arise, are developed and applied, and the immediacy and degree of their impact in our lives. Let me illustrate.
When I were a student at MIT in the ‘50’s, it used to take five to ten years for an idea, or research result from a University, to become reality in the market and in our lives. Today it is almost simultaneous! This drastic change has fundamentally altered how we manage business and how the universities relate to the society at large and to the economic development demands more specifically. In the long past corporate strategists could rely on the likelihood that things would not change for a relatively long time. Long term periods were identified as ten year long, while a short tem was a three year time. Today these expectations are tossed out of the window. There is no “static” period to plan within. Things are ever changing. We live in a time phase when strategies must be dynamic, flexible and responsive to the ever changing conditions around us.