The Intent
Both seller and management want to agree on a price that neither side regrets once the deal is done.
How I Solve It
I define fair value using the 25 Factors Affecting Business Valuation, ensuring that pricing reflects transferable value rather than insider advantage. Factor #21: Minority Interest, Factor #22: Special Interest Purchaser, Factor #24: Risk, and Factor #25: Opportunity are particularly relevant in MBOs.
The 5 Senses Inspection Report ensures the valuation reflects how the business actually functions under management control.
Experience
It is vital because "What is fair value in an MBO?" is not a mechanical calculation. It is a real-world judgment about risk, control, sustainability, and transferability — and that judgment is where 10–15 years of owner-operator and valuation experience, your gut–brain axis, does the heavy lifting.
Why It Is Not Mechanical
On paper, valuation appears formula-driven. In reality, governance rights, risk concentration, growth durability, market conditions, and stakeholder dynamics materially affect value.
Where Experience Changes the Number
Decisions around normalization, premiums, discounts, projections, and defensibility require judgment formed through lived ownership, negotiation, and financial accountability.
Why the Gut–Brain Axis Matters
The brain performs disciplined financial analysis. The gut recognizes unrealistic narratives, hidden leverage, emotional distortions, and deal risk. Together they produce conclusions that withstand scrutiny.
Protecting Financial Lives
The final number affects wealth, control, solvency, tax exposure, and long-term relationships. Requiring 10–15 years of serious hands-on business and valuation experience ensures the answer is fair, defensible, and durable. See my Experience page.
The Result
You reach a fair value conclusion that supports a durable transition and reduces post-deal conflict.