Why an Independent Valuation Is Not Enough to Close a Deal

One of the most common misconceptions in transactions involving capital raises, business sales, and partner buyouts is the belief that an independent valuation will resolve disagreement over price. The logic appears sound. A neutral third party produces a rigorous analysis, and reasonable people accept the conclusion. The deal moves forward. In practice, this outcome is uncommon.

Independent valuations are frequently commissioned with the expectation that they will compel agreement. When that expectation is unmet, the disappointment is often directed at the valuation itself rather than the underlying dynamics of the transaction. The problem is not that the analysis is flawed. It is that valuation is being asked to do work it was never designed to do.

Valuation is a technical discipline rooted in finance and economics. It is effective at estimating value under a defined set of assumptions. It is not effective at resolving disputes driven by incentives, emotions, or power. An appraisal does not realign interests, eliminate strategic behaviour, or transform an adversarial negotiation into a cooperative one. It presents an opinion of value to parties who may have little reason to accept it.

When a counterparty receives an appraisal, the reaction is rarely neutral. At best, it is sceptical. Often, it is dismissive. In many cases, the report is reviewed briefly, if at all, before being set aside. This response is not irrational. It reflects the realities of how transactions unfold.

Some counterparties are not seeking a fair price. They are seeking an advantage. In that framework, fairness is not an objective; it is a concession. No amount of analytical rigour changes that posture.

Others assume the appraiser is aligned with the party who commissioned the work. Whether or not that assumption is justified is beside the point. The perception alone is enough to undermine the appraisal’s persuasive power.

There is also a broader issue of credibility. Outside the valuation profession, formal credentials often carry limited weight. Many transaction participants have encountered inconsistent or low quality valuation work in the past. As a result, even well prepared analyses can be viewed as opinions rather than authority.

This gap between expectation and reality is worth stating clearly. Independent valuations rarely settle prices. They inform discussions. They provide structure. They test assumptions. They establish a range of outcomes under defined conditions. What they usually do not do is force agreement where none exists.

This does not mean valuations lack value. Used properly, they are essential tools. A sound valuation can help a client understand risk, identify negotiation boundaries, and evaluate whether a proposed deal structure is internally coherent. It can prevent costly mistakes made in pursuit of speed or certainty. It can support decision making when used alongside strategy, negotiation planning, and legal advice.

What valuation cannot do is compel a counterparty to behave reasonably if they were never inclined to do so.

There are circumstances where an appraisal carries greater influence. Joint retention can reduce perceptions of bias and signal shared commitment to a process. Even then, the valuation informs the negotiation rather than dictates its outcome.

The most effective use of valuation begins with realistic expectations. An appraisal is not a lever. It is a flashlight. It illuminates the terrain so decisions can be made with clearer sight. It does not move the parties across it.

Understanding that distinction early saves time, money, and frustration, and leads to better outcomes even when agreement remains elusive.