Do: Buyers willing to pay cash have a competitive advantage in this market.
Don't: Sellers should plan 24 months ahead of the sale and avoid presenting unrealistic projections that people will bid on, because if the those numbers aren't hit, the valuation will drop sharply.
Tom O'Connor, managing director of media investment bank Berkery Noyes, says that despite the ongoing credit crunch, deals are still being completed, especially those involving smaller and midsize companies.
“You're going to see deals get done,” O'Connor said, “but you are not going to see a plethora of high-leverage deals happening.”
This could be an especially good time for making strategic acquisitions, he said. “Because if they're for sale and you have cash in your balance sheet, people will be willing to listen,” he said.
This could also be a good time for private equity players targeting specific markets that are expanding.
Berkery Noyes has been active this year in the information, health care and education publishing sectors. O'Connor said these growing sectors are seeing tractions because “if people need liquidity for any reason and they have a unique solution in a good sector, there is $300 billion in private equity sitting on the sidelines with dry mouths.”
Moving forward, sellers should present realistic numbers they can defend. If they go through the transaction process and then don't hit their targets, the valuation will drop drastically and possibly cause the deal to fall apart, O'Connor said. —D.M.