You're navigating conflicting valuation opinions with stakeholders. How do you find common ground?

Often, we rush to solve disputes by jumping to solutions, but true resolution begins with empathy. By deeply understanding each stakeholder’s motivations, we lay the foundation for agreements that benefit all parties. Imagine the possibilities when everyone feels heard and valued—negotiations transform from battles into partnerships.

Stakeholder prioritization and needs assessment: Understanding the motivations behind each stakeholder's perspective is crucial. Short-term stakeholders may focus on immediate returns, while long-term stakeholders prioritize sustainable growth. Recognizing these differences enables a tailored valuation approach. Active listening :yactively listening, you can identify the underlying concerns and drivers behind conflicting opinions. This helps uncover what each party values most and provides clarity on how to align interests. Crafting aalanced approach atakeholder needs are identified, a valuation method that accommodates both short-term and long-term goals can be developed, leading to a more mutually acceptable and beneficial outcome

When faced with conflicting valuation opinions among stakeholders, it's essential to find common ground and reach a mutually agreeable valuation What else can be done ? I suggest the following : Clearly identify the underlying assumptions and perspectives that are driving the conflicting valuations. Use quantitative data, such as financial projections, market analysis, and comparable company data, to support your valuation. Consider using a combination of valuation methods, such as discounted cash flow (DCF), comparable company analysis, and precedent transaction analysis. Listen attentively to the perspectives of all stakeholders and seek to understand their reasoning.

When dealing with differing opinions on valuation, it's vital to prioritize open communication and data-driven analysis to find common ground. Begin by fostering transparent dialogue where all stakeholders can express their perspectives and concerns. Active listening is key, demonstrating respect for each viewpoint and seeking to understand the underlying assumptions. Conduct a comprehensive and unbiased analysis, leveraging data and insights to support your assessment. Shift the focus from individual valuations to shared objectives and desired outcomes.

If it is about fair value of a VC backed business ( growing, often cash negative ) the best indication is a market price. How to then get that? It may be the value of the previous funding round, but only as one factor. If an insider round in a distressed situation, then valuation may be problematic. I would use valuations of comparable private companies or performance multiples of public companies - with a discount. They are all available, if you now where to go to. For VC backed companies Discounted Cash Flow ( DCF ) may be used in limited situations, but is problematic.

Use benchmarks. Find 3-5 similar deals and find the average valuation. Valuations will vary in depending on region, stage, maturity etc. But try and find similar companies that have raised a similar round as recent as possible. This will be a great baseline for your negotiation.

I work with families that own legacy properties. If the current generation of family members (stakeholders) has little interest in the asset, it's time to sell. Owners may have an emotional attachment, or be holding onto value informed only by an amazing offer made long ago that was never real. In such cases, facts must carry the argument to its logical conclusion. Crucial is to determine the "units" you are selling and what is happening in the market today. Are investors or developers paying X dollars per "unit" then 130% of X is pie in the sky. Units may be square feet, residential units or existing cash flow. Do the hard work. Quantify where active investors' are putting money to work, present that data and logic will carry the day

Education to bridge valuation gaps: Educating stakeholders on valuation methods such as comparable company analysis, discounted cash flow (DCF), and precedent transactions helps to close knowledge gaps and provide clarity on how valuations are determined. Transparency in assumptions and inputs: Clearly communicating the assumptions and inputs that drive valuation models ensures stakeholders understand the rationale behind the differing opinions, fostering a more informed and constructive discussion

When facing conflicting valuation opinions, consider bringing in a neutral third-party valuation expert to provide an unbiased perspective. This external assessment can serve as a reference point that all parties respect, helping to mediate differences. Additionally, propose a valuation framework that includes earn-outs or performance-based milestones, allowing the final valuation to adjust based on the company’s future performance. This approach aligns interests and reduces tension by ensuring that the valuation reflects the startup's actual achievements, offering a compromise that respects differing opinions while focusing on long-term success.

Providing sellers with information on valuation methods and tools is important as many are not familiar with them. That being said, it is important to recognize that emotions and perceptions play a big role for sellers. You have to engage with them on the emotional level before you can move to logic and process.

Presenting valuation options and a variety of structure alternatives usually leads to a positive outcome. Doing so creates joint investment and commitment in the early stages of negotiations.

Definidas las posiciones por las partes, es importante revisar las alternativas que, desde distintos puntos de vista, podrían acercar posiciones. La natural subjetividad de la valorización hace que existan argumentos para inclinarse en uno y otro sentido, y la opinión de un tercero imparcial que tome elementos comunes y realice propuestas es clave en este proceso. Ambas partes deben encontrarse conformes y alinear sus expectativas, pues de otro modo representará dificultades el gobierno, crecimiento y salida de la compa?ía.

When a single valuation figure remains elusive, creating a range of scenarios can be a practical solution. Develop best-case, base-case, and worst-case scenarios that incorporate different assumptions about synergies, cost optimizations, and growth trajectories. This approach allows stakeholders to visualize a spectrum of outcomes, from the highly optimistic to the cautiously pessimistic. By seeing the full picture, stakeholders can make more informed decisions, balancing their appetite for risk against potential rewards.

In situations where stakeholders remain entrenched in their positions, a neutral third party can play a pivotal role in resolving valuation disputes. Bridge the gap between conflicting opinions by: Providing objective analysis: Offering independent insights and assessments based on industry knowledge and best practices. Facilitating communication: Ensuring open and constructive dialogue, allowing each stakeholder to express their viewpoint without feeling judged or pressured. Guiding negotiations: Helping stakeholders explore potential compromises and trade-offs to find a mutually beneficial solution. Building trust: Creating a safe space for open discussion and building trust between parties, fostering a collaborative environment.

I believe that it is important to maintain transparency, trust and a good reputation for all parties involved. One of the possible solutions is to establish a process for open discussions and decision-making, such as through voting. Voting power can be determined by the number of shares or size of the commit.

In particularly contentious cases, an independent consultant with the right credentials and industry experience can bring invaluable perspective. Their neutrality helps shift the focus from entrenched positions to collaborative problem-solving. Engaging a third party might involve additional costs, but this investment can prevent costly mistakes by guiding the team toward a more balanced and well-informed decision.

Perspective: Proposing compromises like staggered investments or performance-based earnouts is a powerful way to align interests while maintaining a balanced valuation. These creative solutions offer flexibility and help ensure that both short-term gains and long-term goals are considered, fostering collaboration and trust among stakeholders. Challenge: However, relying too heavily on such compromises can risk over-complicating the deal and may dilute accountability. Performance-based earnouts, for instance, can create future disputes over benchmarks and metrics, while staggered investments may slow growth if not timed carefully. It’s essential to strike the right balance between flexibility and simplicity to avoid unintended consequences.

I have learned that it is very important to gather all of the facts related to a potential valuation issue before engaging sellers. Once you have formed an initial position, it is much better to suggest an open dialogue with sellers/bankers than to take a formal position out of the gate. The former usually results in a mutually defined solution and forward progress. The latter often results in a stalemate if not an outright failed process.

Structured deal terms, such as staged investments or performance-based earnouts, can be effective in reconciling differing valuations. For instance, by deferring a portion of the payment and tying it to specific milestones—like onboarding a major client or achieving a particular EBITDA target—you can ensure that both parties remain committed to the deal’s success. This approach also mitigates the risk for the buyer while keeping the seller motivated, as they still have “skin in the game.” It’s a pragmatic way to align interests and ensure that the valuation reflects actual performance rather than mere projections.

The final stage—documenting and finalizing the agreement—is where all the hard work culminates. Legal agreements must be detailed and unambiguous, especially when dealing with complex earnout clauses or performance metrics. Defining key terms like EBITDA with precision, possibly linking them to specific General Ledger codes, can prevent disputes later on. By taking the time to meticulously draft these agreements, you lay the foundation for a smooth post-deal process, ensuring that all parties remain aligned and that the deal delivers the expected value.

**Securing the Agreement: Clarity and Transparency** Once a tentative agreement is reached on the valuation, it's crucial to solidify it through clear and comprehensive documentation. This document should outline the agreed-upon valuation, the key factors and rationale supporting it, and any compromises or trade-offs made during the negotiation process. Transparency is paramount at this stage. Ensure all stakeholders have ample opportunity to review and thoroughly understand the agreement before finalizing it. Address any remaining questions or concerns, fostering a sense of ownership and commitment among all parties involved.