The M&A Weekly Digest today explores: the growing unpopularity of IPOs coupled with the increasing popularity of companies wanting to sell; the amount of dry powder that private equity firms are sitting on; various business valuation methods; and timing yourfrom your business.
Why An Online Soap Opera Mogul Doesn’t Want To Go Public
The IPO is no longer the end game for startups. Now, the exit strategy of choice is selling your company.
“There is a general attitude that the cool kids sell their companies rather than going public,” one entrepreneur said.
Private Equity Firms and Dry Powder
“[T]he total cumulative overhang now stands at an estimated $432 billion, which is essentially where it has been for nearly a year. Notice, too, that $172 billion, or 40%, of the dry powder was raised in 2008 and 2009. Since these funds have a limited life span, usually 5-6 years in which to invest the committed capital, the next couple of years should be very active for these equity firms as they seek to invest these funds prior to the life of the fund expiring.”
Business Valuation Methods
“Anyone who tells you in your first meeting with them that they either know your value or can tell you which formula they will use in valuing your business should be avoided. It is impossible to define that until the evaluation is complete. We aren’t the only ones saying this. The IRS weighed in on the topic of valuing privately held companies several years ago.”
Exit Planning Strategies – Timing Your Exit
“Surveys indicate that the vast majority of business owners have never considered the timeline for their exit. For example, according to a study conducted by Whitehorse Advisors, ‘96% percent of baby boomer business owners agreed that having an exit strategy was important, but 87% do not have a written exit plan.’ If you were born between 1946 and 1961, you fall into the baby boomer group.”
Carl Doerksen explores the two key components of a formal exit plan. Click here to read the entire article.
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