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.
Best wishes!
* 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.