Valuation And Market Timing In Private M&A Transactions

Abstract

The objective of this case is to teach and initiate a classroom discussion about the optimal market timing for the sale of a mid-cap privately held firm.  The discussion is facilitated by a real world case example that focuses on the sale of a Little Rock, AK based plastic injection molding company with approximately $20 million in revenues.

Theoretical and practical issues central to receiving maximum price in relation to selling at the right time are addressed.  Considered are the desired time to close the deal from the owner’s point of view, the time required for successful completion of the sale process, business conditions in this industry, firm-specific business conditions, and ability of agents to time this market. 

This case also discusses various reasons for the sale of private companies and the effect of respective sale motives on the placement of these firms.  Principally, the retirement decision by the owners of small privately held firms as the most frequent reason for the sale of these companies is explored.