Price vs. Value: A Transaction Advisor’s Perspective

Why understanding the difference can mean the difference between a missed opportunity and a meaningful deal.

By Ramesh S. Mahalingam

"Price is what you pay. Value is what you get." - Warren Buffett.

In M&A, this isn’t just a clever quote — it’s a distinction many overlook, and often at great cost.

I’ve often seen sellers and buyers anchor themselves to anecdotal deal multiples - headline figures that made the rounds for being unusually high or low - without pausing to ask why that price was paid. They are unaware that the price achieved in one deal may have little relevance to another. The result? Mismatched expectations. Stalled negotiations. Deals that should’ve closed, but didn’t. Opportunities lost.

The Core Distinction: Price ≠ Value

Price is what ends up on the term sheet. It’s the product of a negotiation, shaped by who has more leverage, what the structure looks like, how the payment is timed, and a dozen other contextual factors.

Value, however, is what a business is truly worth. It includes the fundamentals – revenues, margins, assets – but also intangibles like future growth potential, competitive advantage, and strategic alignment with the buyer.

One way to think about this is the Transaction Triangle, where three forces intersect to influence the final price:

The Transaction Triangle

   This is a simple but powerful visual model to explain why the price of a business is often disconnected from its value. Each corner of the triangle represents a key factor that shapes transaction pricing: Context, Compulsion, and Comparables. Context includes macroeconomic conditions, industry cycles, and interest rates at the time of the deal. Compulsion refers to the urgency or strategic pressure on either the buyer or seller, such as financial distress, succession needs, or competitive threats. Comparables are the past transactions that parties often reference, sometimes without understanding the specific circumstances that made those deals unique. This triangle ties directly into the article's central theme: while price is the numeric outcome of negotiations, value reflects a deeper, situational truth. Overemphasis on one corner, especially comparables, without regard to context or compulsion often results in mismatched expectations and missed opportunities.

The Problem in Practice

Let me illustrate a common scenario:

• The seller reads about a company in their industry that sold for 12x EBITDA. He believes his own business should fetch at least that multiple, not recognizing the other business had long-term contracts in place, zero debt, and a strategic buyer with a pressing need to expand.

• The buyer, on the other hand, cites a deal that closed at 6x EBITDA and insists the current target is worth no more than that, ignoring the fact that the 6x deal was a distress sale by a founder facing health issues.

Both sides are comparing prices without adequate appreciation of the unique value factors in play. Neither was wrong on facts. Both were off on context.

Case Study: The Missed Cybersecurity Deal

A few years ago, I advised the founder of a high-growth cybersecurity services firm. The business had built a strong niche in identity protection and was posting 60%+ year-on-year growth. The buyer we were megotiating with cited a peer that was acquired at a 5.5x EBITDA multiple and proposed a similar offer.

What the buyer missed was this:

• The “comparable” deal involved a legacy antivirus firm with low growth.

• Our client had no debt and recurring revenue streams or “annuity income”.

• The market for identity protection was expanding rapidly, with large enterprises actively acquiring specialized capabilities.

The buyer passed. The firm was later acquired by another strategic investor at nearly 3x the original offer, and has since grown several fold in value. That buyer recognized value, not just price.

Why It Matters

Failing to appreciate the difference between price and value results in:

• Sellers holding unrealistic expectations, leading to failed processes.

• Buyers walking away from high-potential deals based on flawed benchmarking.

• Advisors being blamed unfairly for not “matching” headline valuations.

• Missed opportunities for both parties.

Takeaways and Recommendations

1. Stop benchmarking blindly. Every deal has unique circumstances.

2. Understand the deal context. Urgency, financing structure, and asset ownership matter.

3. Appreciate strategic drivers. Sometimes the value lies not in today’s numbers but tomorrow’s potential.

4. Engage professional valuation advisors. An independent view helps anchor expectations.

5. Ask the right questions:

   • Was the deal an outlier or a trend?

   • Was there distress or compulsion?

   • Have interest rates or industry dynamics shifted since?

Here's a simple Valuation Hygiene Checklist to use:

• Are you comparing similar businesses and similar circumstances?

• Was debt included or excluded in the deal multiple you’re referencing?

• Are growth prospects, margins, and customer stickiness comparable?

• Are you valuing assets, cash flows, or strategic capabilities?

In conclusion

Price is visible. Value often requires discovery.

The best deals happen when both sides go beyond surface-level multiples and understand the strategic, operational, and financial realities that drive long-term worth. If you’re buying or selling a business, don’t just ask what it costs. Ask what it’s worth.

And remember: Price is momentary. Value is enduring.