After Holding On in Recession, Companies May Cash Out in 2010

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This week’s Fort Worth Business Press contains an article about expectations for merger and acquisition activity in 2010. For the article, John-Laurent Tronche interviewed Managing Partner Layne Kasper. Following are excerpts from the article:

After holding on in recession, companies may cash out in 2010


January 04, 2010

Executives at two area business brokerage firms say more businesses will be looking to cash out in 2010, after a recessionary stall during the past year and a half that persuaded many business owners to hold tight.

Business brokerage houses are, simply put, matchmakers. Buyers meet sellers in a mutually beneficial transaction that helps the former grow and the latter a chance to retire or move on to something else.

The year 2009 wasn’t as busy as other years for area matchmakers.

“Deal flow has really gone down — and by that I mean the number of companies for sale has really decreased,” said Layne Kasper, a managing partner at Fort Worth’s Kasper & Associates, a 25-year-old business brokerage firm that focuses primarily on companies in the manufacturing industry. “A lot of that can be attributed to the general economic slowdown.”

In 1984, Layne Kasper’s father, Ed Kasper, was in charge of selling several divisions of an east Fort Worth manufacturing company. He sought the advice of a business brokerage firm, but wasn’t satisfied with the companies’ knowledge of the manufacturing industry, in which Ed Kasper had worked for a long time. So, after getting the sales completed, he launched Kasper & Associates to specialize in helping companies in the manufacturing industry, or other industries, that are looking to sell find a buyer.

Twenty-five years later, Kasper & Associates has eight associates and has been involved in more than 300 transactions for companies with annual revenues of between $1 million and $70 million.

Since Layne Kasper joined the firm in 1997, he has seen three periods of economic stagnation: the dot-com bubble and burst, following the Sept. 11, 2001 terrorist attacks and the most recent recession. In each case, the number of businesses looking to sell has gone down because the value of the company has dropped. For example, a company looking to sell itself for $10 million might find the going price at $5 million due to market woes. In that case, it might be better to hold out until market conditions improve so the company’s valuation is higher.

“When times are tough or the economy is down, it may take a little bit longer to do transactions,” Layne Kasper said. “In most cases, it takes about six to eight months from the time we get started until the business is sold. We’re seeing that now extend a little bit further, maybe eight to 12 months, because of some of the issues with bank financing and some of the due diligence that buyers need to go through.”

Link to the complete article:

Best wishes for continued success in the New Year.

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