2. Stand-alone Valuations

The first step is to conduct a stand-alone valuation of the target company as well as the acquiring company in the status quo.

Status quo means that the valuation should be conducted under the firms'

  • current strategy
  • current management
  • existing investment, financing, and payout policy 

 

The stand-alone valuation of the target company factually tells the acquirer how valuable the target company is to its current shareholders if the acquisition in question does not take place. Therefore, this stand-alone valuation will often reflect the minimum price the acquirer has to offer to be considered.