Can valuation depend on deal terms or structure?

In the context of mergers and acquisitions, the valuation at which a business sells is strongly tied to the terms and structure of the deal. Moreover, even the size of the buyer pool and number of exit path options depend on the combination of valuation, terms, and structure. 

A few examples of key terms are: extent of cash paid to seller at closing, the cash that will be paid during years after the closing, if left-over proceeds are structured as debt or earn-out, treatment of cash, inventory and working capital in the deal, any counterparty risk based on reliability of the buyer, any deal terms that make the payments contingent, and the feasibility of recourse.

Sellers seeking a quick & full exit often need to settle for a lower valuation. If a seller stays on as a consultant, an employee, or a worker-owner, the realized valuation will likely be greater, since the new owners will be able to draw from the seller's experience in running the business. Typically, to account for the additional risk associated with longer-term financing, and for the disparity between the present and future value of money, the longer the timeline for paying cash to the seller, the higher the valuation used for the deal.

Zolidar’s Aha! Planner calculates standard financial metrics to make it easier for sellers to compare different deal structures. It provides the net present value as well as projected value of reinvested proceeds across deal structures.