Since it's Friday, let's clean up the email bag with an answer to a valuation question.
Matt from New York writes that a few years ago he sold his company and the banker representing the acquirer used several merger comps, or precedent acquisitions, that the banker said were proprietary. Proprietary in this case meant that the investment bank had done those transactions, so they obviously knew the multiples even though the terms of the deals were not disclosed to the public. Matt is wondering if he was taken after reading my post about requiring documentation for pre-acqs.
Well Matt you probably didn't get taken, as I know the firm you mentioned and several people that work there and all have excellent reputations. Plus Matt did the right thing by confirming that the bank did do those transactions. Here are a few things you can do next time.
- Weigh the Impact. If the multiples of the proprietary comps are all at the high end, then you may have some problems. If not, better to just let it go.
- Get it in Writing. Ask for letters from the represented parties to the transactions, confirming the multiples. The acquirer's banker should be able and willing to get these.
- Call the Bankers on the Other Sides. The bankers on the other sides of the proprietary deals might be willing to confirm the multiples. Your banker probably has contacts at those firms and can find out.
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