Saturday, February 13, 2010
Is it a lousy time to sell your company?
The conventional wisdom holds that recessions - which depress business asset values - are lousy times to sell successful companies. This is both because earnings are down and the earnings multiples that buyers will pay are lower. It is said to be a 'buyer's' market and sellers should stay away. But that analysis ignores several salient facts: Yes your asset's value is down in value, but so are everyone else's. If an owner is taking stock in payment, it's the relative performance of the buyer vs. the seller in the cycle that matters. If you're taking cash, it depends on what you intend to do with it. Financial assets, luxury homes, even trophy wives are cheaper during downturns.
It's much more important to pay attention to what is going on in your sector and what your goals and intentions are then to slavishly go to market when everyone else goes. It could be that if you're the only asset in a sector available, you could set off a bidding war between all those 'bargain hunters'.
Food for thought while sitting out in the Openwater.