What is generally recorded in Mergers and Acquisitions to represent fair market value?

The fair market value (FMV) in the context of mergers and acquisitions is typically represented by FMV obtained from third-party appraisals. This approach is favored because independent appraisals bring objectivity to the valuation process, helping ensure that the assessed value is reliable and not influenced by internal biases or conflicts of interest.

Third-party appraisers have the expertise to analyze comparable transactions, industry standards, and market conditions, making their assessments more credible. This is particularly important in M&A transactions, where accurate valuations are essential to making informed decisions, negotiating terms, and ensuring both parties have a fair understanding of the company's worth.

In contrast, estimates from market analysts or a company's internal assessments may often be subjective or biased, as they might not fully account for all market factors or may reflect the optimism or pessimism of the internal team. Listed stock values might provide some insight into market perceptions, but they can also be volatile and influenced by factors unrelated to the underlying value of the company being acquired. Thus, relying on third-party appraisals is considered best practice to achieve an accurate and fair representation of valuation.