When one company buys another company, accounting rules require the buyer go through a purchase price allocation of the seller’s assets and liabilities. A transactional valuation team is brought in to determine the fair market value of the seller’s assets and liabilities. This includes hard-to-value intangible assets.
Transactional valuation can be an interesting career for anyone that really wants to have a deep and thorough understanding of valuation, or who is interested in the acquisition process. While not as high profile as M&A investment bankers, transactional valuation analysts are extremely important as they allow acquirers to recognize the proper value of assets, liabilities, and goodwill on combined companies’ balance sheets.
Most transactional valuation analysts have undergraduate degrees in accounting, but it’s possible to pursue this role with a degree in finance as well. Accounting is preferred since analysts need to have a thorough understanding of accounting rules and determining assets and liabilities (it’s more technical than most people think!).
The outlook for transaction valuation analysts is very good, as mergers and acquisitions are common regardless of the business cycle.
Transaction valuation analysts work in the largest accounting firms, as well as smaller or middle-market firms. Compensation is usually higher for valuation analysts than, say, audit professionals, but not as high as investment banking.
Key Skills for Succeeding in Transactional Valuation
A transactional valuation professional must have an excellent grasp of financial analysis and valuation. The valuation skills for this role are some of the most technical in the industry; much more so than investment banking. Strong communication and interpersonal skills are critical, as the analyst will work closely with the acquirer and the target company in order to perform a correct purchase price allocation. Finally, attention to detail is of the utmost importance, as is the ability to work under pressure and meet tight deadlines.
People skills, such as management skills, communication skills, negotiating skills, and networking skills, are also critically important, as they are in most finance roles.
Getting into Transactional Valuation
Transactional valuation professionals may be hired after obtaining an undergraduate degree, typically in accounting. Internal hires are also very common. Many large accounting firms (like the Big Four) have transactional valuation roles, in addition to the more traditional audit roles, so internal movement between groups is high. New hires are usually known as analysts or associates, but this may differ among firms.
Professionals in transactional valuation have several exit options: 1) move up within the group and have a very rewarding career, 2) move into another group in the same firm, 3) move to an investment bank, or 4) move to the corporate side. Moving to an investment bank is possible, but transactional valuation professionals won’t be involved in the entire M&A process, so this would be a difficult transition. However, transactional valuation professionals will have significantly more in-depth valuation knowledge due to purchase price allocation or other specialist valuations requested by the client.
A Day in the Life of a Transactional Valuation Analyst
A day in the life of a transactional valuation professional can vary depending on the specific services the firm provides, as well as the size of the firm. Analysts will usually spend a typical day reviewing company documents and financial statements, identifying assets and liabilities, and applying the appropriate valuation methodologies to these assets and liabilities as necessary.
Interview Prep for Transactional Valuation
Interview prep is critical for landing a job in transactional valuation. There are three main categories of questions in valuation interviews: behavioral, technical, and prior deal experience. For behavioral and technical questions, check out our investment banking interview guide. Pay special attention to accounting and valuation questions, given that is the focus of this role.
Preparing for a Transactional Valuation Career
A career in transactional valuation can be highly rewarding and intellectually stimulating. While pay is lower than investment banking or private equity, there is generally a better work-life balance.
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