One of the most difficult aspects in closing a deal — whether the deal is an acquisition, divestment, or merger — is the valuation of the target asset. A key point in a deal is to agree to the amount to be exchanged for the asset between a willing buyer and seller in an arm’s length transaction.
The difference between the buyer’s value expectations and the seller’s value expectations is called the valuation gap, which, as reported in the recent EY Global Capital Confidence Barometer, is expected by most executives to widen in the current business environment. The report indicates, however, that the gap is only 10% to 25% and is expected to remain stable in the future. The same holds true for expectations on asset prices. The factors indicate that conditions are more conducive for deal making, which is consistent with the expectation of almost half of the surveyed executives that more deals will be closed in the foreseeable future.
Apr 102016