Victor Kiam, the American entrepreneur who made his fortune with Remington electric razors, was widely known for his quote that “he liked the product so much, he bought the company”. One of his lesser-known quotes was “information is a negotiator’s greatest weapon.” In the world of mergers and acquisitions (M&A), business valuations often become the subject of negotiation as actual value and perceived value can differ widely.
With many companies the real value may be completely reliant on repeat customer transactions. What if the company you are looking to acquire is not product-based but is a service provider, such as a telecommunications company? What if growing your customer base is almost impossible due to market saturation or other geographical constraints? In these cases, knowing the customer lifetime value can help.
