Publications

- November 1, 2014: Vol. 1, Number 2

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‘Fit’ Is Equal to Valuation in Business Sales

by Richard C. Wilson

When evaluating the merits of a proposed business sale transaction, it is unfortunate how often analysts, dealmakers and investment bankers discount the importance of cultural and personal fit, especially one that requires the approval of a founder.

Founders are very protective of their businesses and often spurn economically attractive offers for reasons beyond valuation. Would-be buyers need to make a strong case that a deal is in the best interest of the owner’s family and/or the company’s long-term viability. Companies that are controlled or managed by the original founders or descendants of the founder are especially in need of persuasion, and there is likely to be an inherent skepticism of any offer, especially an unsolicited one.

Even in the corporate arena, unsolicited bids and even competitive auctions may be rebuffed for factors other than the offer price. For example, Yahoo and Microsoft did not merge largely because Yahoo founder Jerry Yan

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