As someone who has always preached that valuation is more of an “art than science,” I found it interesting when reading a recent Washington Post article on cooking ribs that one of the experts used this same phrase. Of course, he was referring to the ambient temperature outside of the smoker and the amount of rub and spices utilized, not expense-down assumptions and the correct discount rate. Nevertheless, I find the phrase applicable in the world of M&A.
When we delivered our recent valuation webinar series, the “art” definitely shined through as participants asked questions about real life situations. The “science” was presented as frameworks and processes that provide folks on the M&A teams with a way to set up conversations to test the inputs. This same rib cooking expert said “be a sponge…learn all you can about the different techniques – learn how different people may approach the same situation differently.” Then, like valuation, use the best practices and see what works for you and your organization. Whether you enjoy baby back, St. Louis-style or spare ribs – OR – the income approach (better known as DCF or Discounted Cash Flow), market approach (comps) or asset methods – there is no doubt that there are immediate benefits when you learn the art of valuation.
Photo taken by hepp