Asset vs. stock sale: What discount is appropriate for a stock sale?

by a searcher from Harvard University - Harvard Business School

3 years ago

As I'm sending out IOIs and setting potential price ranges I'm basing all of my valuations on an asset sale. If the owner insists on a stock sale, on average, what discount do you think is appropriate? I recognize this question varies greatly by industry and perception of potential liabilities, but all things equal, what percent reduction in price do you think would be market?

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12 comments

searcher from University of Texas at Austin

How did this turn out?

1 year ago | like reply | 0 likes

investor from Illinois Institute of Technology

It's more than just the tax implications, like C corp double taxation on assets, etc. You need to really vet all the possible liabilities you will be assuming in a stock deal. These will have to be scrubbed in your reps and warranties in a stock deal moreso than assets. For instance environmental exposure. For instance, a 1990's deal might mention an "environmental" rep..... a 2000 deal might have a 5-10 year limit of exposure on the seller (the seller being on the hook###-###-#### whereas today, you'll have probably unlimited timewise liability on the seller.

3 years ago | like reply | 1 like

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