M&A Blog

Caveat Emptor — the Latin phrase for “Let the Buyer Beware” – has been the orientation of laws governing trade in English speaking Western countries for centuries. That is, buyers of goods bear the bulk of the burden to protect themselves from harm that could befall them in a purchase transaction. Maybe our forefathers were [...]

An article in today’s Wall Street Journal (January 4, 2012) corroborates what we’ve been seeing and telling our clients. Namely, that private equity firms are:

Very active
Paying premiums
Buying smaller companies than in the past
Using less leverage (more equity)

What is the ONE characteristic of a business that drives buyers mad? That will cause business buyers to lose their ability to negotiate aggressively? Cause them to throw dollars at you like they’re rubles?

Let there be no doubt – it’s a great time to sell a business. My phone rings regularly with private equity group representatives looking for deals.

“Private Equity buyers are sharks. They must keep moving to stay alive,” quipped David L. Perkins, Jr., Managing Director of Acquisition Advisors. “Sitting still is not in their DNA. They hunt and they acquire. And because the food is scarce these days they’re more aggressive than ever,” he continued.

Question: We have a business we would like to sell, but not sure if it is too small for your firm to consider. It’s a “new media” business established in 1999 and very successful and growing. 2010 sales were $600K. We anticipate sales of $700K in 2011 with a 55% margin. It seems to be difficult to find firms that represent businesses in our revenue area. Our business is not the type of business that would sell “locally.” We think it must be marketed nationally to strategic buyers. Our business is in a high-growth field and has been developed to be a “growth” business.

Acquisition Advisors is please to announce that WestOak Industries has been purchased by a St. Louis-based private equity group. Acquisition Advisors represented the seller.

WestOak Industries is a highly efficient and profitable electronic manufacturing service (EMS) provider located in western Oklahoma. EMS is a category of companies that design, test, manufacture, distribute, and provide return/repair services for electronic components and assemblies for original equipment manufacturers (OEMs).

Question: What is the industry valuation multiple for the commercial heat treat industry? Also, is there a chart somewhere of the trends in multiples through the years?

We’ve written recently about premiums being paid for the purchase of private companies due to a supply-demand imbalance that has emerged that favors sellers (see “Premiums Being Paid Due to Supply-Demand Imbalance” and “Suddenly, A Business Seller’s Market.”)

In today’s Tulsa World, Fred Russell is quoted as saying, “The value of something depends on what other people are willing to pay.” This may seem like common sense but people commonly forget it in practice. They waste a lot of money as a result.

Mr. Russell’s comment was in an article that appeared in the business section titled, “Dollar Thrifty Investor Lets Go of 5.5% of Shares.”

You knew him. He was the talk of the town. Spent a fortune. Had everything. Then, suddenly, busted. Bankrupt.

Everyone was shocked.