No one has a crystal ball, but many think 2012 will be a much better year than 2011 for the sale of your privately held company.
Merrill Datasite*, in partnership with the Association for Corporate Growth (the “ACG”), recently completed a survey of ACG members which offers some guidance for prospective Sellers in 2012**. Over 200 executives responded, and most interesting of the many findings were:
- More than half of the respondents – 57% – expect their firms to be “much more active” or “somewhat more active” than last year.
- Almost 1/3 indicated their major objective would be to increase market share in an existing market or product line, and about 1/4 indicated the major objective would be to allow entrance in to a new market or product line.
- Many corporations are sitting on cash, and have a pressing need to invest that cash wisely (otherwise they will come under increasing pressure to distribute the cash to shareholders).
- More than 3/4 of respondents believe that the revenue of their targets will be less than 25% of their own.
What does that mean for you as a Seller of a privately held company?
- Increase activity in 2012 should result in higher sales prices – multiples should generally be strong.
- You, the Seller, should be focused on your competitors as your most likely acquirers. From a practical and legal perspective, that means it is even more important to use a third party intermediary – a broker or investment banker – and to protect your interests during the sales process with an effective NDA.
- Your Buyer will likely be much larger than you, the Seller, with revenue of from 4 to 10 times higher. (You should assume, therefore, that the Buyer will have more resources – financial, legal and otherwise.)
There are, of course, a number of factors that could dampen demand, and therefore make selling more difficult, including among other things the political uncertainty of this being an election year and the EU crisis.
* I have previously mentioned Merrill Datasite in comments about my blog posts on using Virtual Data Rooms.
**Access to the full white paper will require your registering with Merrill Datasite; go here.