Research on Current Market Environment

November 02, 2022

by a searcher from Columbia University - Columbia Business School in New York, NY, USA

I'm in the early stages of a process and am trying to align on value. There is a sizable bid/ask spread right now which is stemming from the fact that the Seller is clinging to a high mark valuation that the banker advisor showed him when he was pitching to win the deal. That was in a different world (6-9+ months ago) vs. what we are in today and the foreseeable future given high interest rates and conservative financing.

I am looking for any research or whitepapers for me to help spell out the fact that this new market environment has fundamentally changed the value of the underlying business. I realize this is a bit of a nuanced ask but has anyone seen any materials that could help, or has anyone had to do something similar to this recently? Thanks!

Reply by a professional
from The College of New Jersey in La Verne, CA 91750, USA

What industry? I publish biannual industry analyses on a number of industries. We've generally seen multiples come down over the last year as inflation and economic uncertainty have increased. Take a peek at what I have on my site:

www.valuanalytics.com/blog

You can compare analyses from period to period if you want to see how some of the fo us has changed in the way public companies are priced. Won't be a direct comparison to a small business, but illustrates a general shift in investor sentiment.

Reply by a searcher
from Harvard University in Miami, FL, USA

I unfortunately think it'll take some time for the valuation gap to close. I'd recommend putting what you think is a fair offer on the table, and if the seller doesn't like it, it makes sense to walk away sooner rather than later. In that case, you should try to leave things in as positive a state as possible, then check in a few months down the line to see if the seller is interested in reengaging within the terms you proposed.

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