Buying a Business: Valuation is Key

The mergers and acquisitions (or just M&A) world is seeing a lot of activity right now. Global M&A volumes hit a new record in 2021, overtaking last year’s record.

But whether a particular company sells depends on its own marketability and valuation. Not just on the market.

In speaking with a buyer last month, I asked him when the target company was last valuated. It had been a year, so I advised him to get another valuation.

When he did, the valuation came back at 80% of the previous value. It was a stagnant business, with no systemization and very dependent on its owner. The hot state of the market didn't matter.

Savvy entrepreneurs who are bored with whatever they're currently doing might consider getting into a new industry by buying an existing business. It’s a great time to put that extra cash to work.