Cashing Out;

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With interest rates down and the business world in the throes of mergermania, 1986 promises to be a banner year for the buying and selling of companies, especially small to midsize companies. The Geneva Cos., which tracks such matters, estimates that 25,000 businesses will be sold this year, and about half of them will be companies with revenues in the $1-million to $50-million range.

And why will the owners be selling those companies? Boredom and burnout, according to Geneva -- at least in the majority of cases.

Geneva bases its prediction on eight years of experience in working with primarily smaller, privately held companies on sales, mergers, and acquisitions. According to David R. Hoods, president of Geneva Marketing Services, which maintains Geneva's database, the typical seller is a man who has started his company from scratch and done very well. He's been in business 19 years or more. His kids have gone to college. He's lost one or more spouses along the way. "He's climbed the mountain, and he's asking, 'Is that all there is?' He's tired of the fight."

That fact notwithstanding, more than a third of the sellers eventually go on to buy or get involved in another kind of company. "Often they'll say, 'Gee, why not combine a hobby with a business," says Hoods. "The first company was for success; the second, perhaps, for more personal satisfaction. One of our clients had a successful plastic-molding business that he sold. Two years later, he bought a crop-dusting business. I mean, that guy wanted a whole new baby!"

Hoods adds that, in selling a company, it's important to take enough time -- usually 12 to 15 months -- to position the company for sale, to find the right buyer, to sell, and to close. "Seventy-five percent of owners who sell get less than the business is worth. They don't understand the value of the business. They expect too much or too little.But beauty is in the eye of the beholder. To the right buyer, the business could be worth, say, $6 million, [but it might be worth] only $2 million to someone else."

Last updated: Mar 1, 1986




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