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Does the Facebook WhatsApp Deal Have You Thinking “What’s My Company Worth?”

You’re not alone! WhatsApp, a mobile phone application developer, received a $10 billion offer from Google and… they turned it down. And then, to the industry's surprise, Facebook upped the ante and put a $16 billion offer on the table. 

 
With the news of this high-profile proposed acquisition, many business owners are reconsidering what they think their company is worth, and whether the time is right to court a potential buyer. Some may see the WhatsApp deal as an economic indicator that buyers in the technology sector are optimistic and willing to raise the stakes, and the potential value of companies might be on the rise. Is your company worth more than you thought? 
 
Consider an important factor: The higher your asking price is for your company, the more limited your market will be for a buyer. For example, in the case of WhatsApp, only a certain number of companies can afford to buy a company in the billion-dollar range. And within that group, each purchaser will have their own desires as to what they want to do with the property once they buy it. If the owner is unconcerned with what happens to the company after the sale, then the latter consideration is a non-issue. But, in the case of the Facebook proposal to acquire WhatsApp, both companies claim that it wasn’t about the money, but a synergy between the two companies.

The negotiation between a buyer and a seller will be based upon many different factors, from the business' valuation to the seller’s motivation for selling. So, does the recent Facebook and WhatsApp deal have an effect on your asking price? It is true that public companies in the technology and life sciences sectors are “booming,” but a realistic business valuation should be carefully conducted rather than choosing a price tag based on a reaction to the unusual deal between Facebook and WhatsApp.

Marc Fogarty, Audit Partner and a member of EisnerAmper's Public Companies, Cleantech and International Services Groups. Marc is experienced in public accounting, serving public and private organizations and has presented on IFRS to professional groups.

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