Is this the right time to sell?

I was recently asked by a business owner if this was the right time to sell. We are all aware of the economic turmoil in the market today and at face value, it seems that this is a key question CEO's should be asking. My answer might surprise you.

I said "it might be". It depends on the specific circumstances of the business - financial position of the business, availability of capital to operate the business, competitive landscape, share price multiples if publicly traded and if privately owned - age of the owner, physical health and financial health. In fact this might be the absolute best time for a specific company to be sold if the current circumstances or strategy require it.

I think the more appropriate question is "Can a company be sold in today's environment?"

While transaction structures might have changed to reflect the uncertainties in the market, good quality companies are still in demand. The companies that will be hardest to sell are those that are unable to differentiate themselves in the market place - for example, commodity products and services, poor sales and marketing, vulnerability to competitive pricing, shallow customer penetration, etc.

We are in the final throws of selling a business that we took to market in the fall of 2008. The market response we received is almost as strong as what we saw in 2007 for similar businesses. In a future blog I will share some of the details about this particular sale and why we believe the results will hold for other quality companies.

There is still a market today for good companies. In fact, we are encouraging our clients to consider the strategy of divesting non-core divisions. Such a divestiture will have a number of immediate benefits:

- strengthen the balance sheet by generating cash and reducing debt.

- free up management resources to focus on core-operations.

- position the company to take advantage of some of the merger/acquisition opportunities that will emerge over the 18 months.

If you would like to explore this further, contact me at doug.nix@cfaw.ca

Douglas Nix, CA
CFA Oakville