Patience is a virtue. In the 1970s television show, “Kung Fu”, David Carradine portrayed a character who had been trained as a monk in China. The character’s mentor often conveyed words of wisdom, including “Patience, Young Grasshopper”. In the M & A context, patience is important. After a modest downturn in M & A activity in the second and third quarters of 2020, M & A activity has picked up briskly. Potential buyers, especially private equity firms, own plenty of cash and demand for acquisition targets by buyers outstrips the number of sellers. This has resulted in generous valuations in certain industries, such as health care technology. From a seller’s standpoint, however, the time may not be right to sell. Valuations in other industries have been more modest, along historical lines. Every seller needs to ask whether the current stage of the seller’s business and personal life is the right time to sell. If the purchase price proposed by a buyer is modest and the target company is very profitable, it may make sense to wait to sell. That way, the owners can enjoy several more years of substantial profit distributions and then embark on a sales path. For good companies, there will always be buyers. Sometimes, the virtue of patience should govern the sell or hold decision.
If you have any questions about this or any other M&A issue,
please contact Glenn Solomon at firstname.lastname@example.org or 443-738-1522.
ABOUT GLENN D. SOLOMON
email@example.com | 443-738-1522
Glenn D. Solomon is a principal at Offit Kurman and has provided counsel to businesses and business owners for more than twenty-five years. He has extensive experience in the purchase and sale of businesses, structuring ownership agreements, and advising companies in financial distress.
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