When Takeover Targets Become Takeover Artists

Equity Values are Falling. Instead of Panicking, Why not Buy Out a Competitor?

by François M. de Visscher

When it comes to mergers and acquisitions, family businesses usually think of themselves as potential targets, not acquirers. But now may be the perfect time to start thinking more like a potential buyer.

Several economic factors are converging to create a buyer’s market in the acquisitions arena:

  1. Valuations of private companies have dropped along with public valuations. When family companies see their own valuations diminishing, they often assume a defeatist attitude. It’s harder to create liquidity for shareholders. But the value of your competitors has likely fallen as well. That’s good if you’re a potential buyer. Instead of retrenching into a defensive posture, consider going on the offensive, by expanding or developing new lines and getting into new markets. Think of an acquisition as a different way to create value for future generations of shareholders.  More…

Bridging the Valuation Gap

Determining what a Share of Family Business Stock is Worth can Lead to
Conflict Unless Middle Ground is Found

by François M. de Visscher

Disagreements over the valuation of family business stock are prevalent and increasing today. The rising public equity market, combined with the current hot acquisition environment, has widened the gap between the high valuations shareholders can obtain from buyers and the low valuations that help minimize gift and estate taxes.

The situation is even more complex in families that are already transferring ownership to the next generation. Often there is an expanded shareholder base composed of relatively well-educated and sophisticated baby boomers. When these savvy owners seek liquidity of their stock, their value expectations are substantially higher than the “estate valuation” sought by their seniors for succession transfers and intrafamily buy-sell agreements.

The question for current owners is: In which direction do I go? More…