What is the difference between Value and Price?

Value is a theoretical calculation based on risk and return; Price is the cheque signed at closing. A valuation report gives you a range; a competitive bidding process gives you a price. In the Swiss M&A market, the 'Strategic Premium' often decouples the Price from the intrinsic Value. ### Technical Explanation In the high-stakes environment of Swiss M&A, the distinction between Intrinsic Value and Transaction Price is the difference between a spreadsheet exercise and a bank transfer. Understanding this delta is the primary duty of the advisor. #### Intrinsic Value: The Theoretical Baseline Intrinsic Value is determined by the fundamental financial health of the company as it operates today. Using standard methodologies like the Practitioner's Method or Market Multiples (EBITDA), we estimate what a rational, financial investor would pay. This calculation assumes the business continues on its current trajectory and is heavily influenced by the Liquidity Discount (20% to 40%) for private shares. #### Transaction Price: The Market Reality Transaction Price is the outcome of a negotiation and includes the Strategic Premium arising from: 1. Synergies: A strategic buyer pays for the value they create by owning you (Cost Synergies and Revenue Synergies). 2. Scarcity and Control: High-quality, succession-ready SMEs are rare. A Control Premium (20-30%) is paid for the right to direct strategy. 3. Deal Structure: A CHF 10 million offer with a 3-year earn-out has a significantly lower risk-adjusted Price than a CHF 9 million all-cash offer. #### The Psychological Dimension The gap is often bridged by psychology. The Patron holds a Liebhaberwert (emotional value), while a buyer's FOMO (Fear Of Missing Out) on a strategic market entry can drive the Price to irrational levels, provided the seller maintains competitive tension.