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Financial crisis makes selling companies harder
Jan. 16, 2009
The owners cannot expect to sell their company for such a good price as even half a year ago. The gap between the price offered by the owners and the price buyers are willing to spend is widening.
"Buyers are offering lower prices these days. We have seen cases where the company price fell by half from April to September last year," said Miroslav Bratrych of Czech PricewaterhouseCoopers office.
It is not the only such case. For example, the consulting firm Raedbank reported a 15% decline in prices on average. "Company prices are falling sharply as a result of the worse business results at the end of last year," said Raedbank's partner Michal Mi un.
All consulting agencies HN had asked said the number of unsuccessful company sales has been growing. For example, Agropol, the second biggest agrochemical firm in the Czech Republic, is currently available for sale, but the owner Ji í Malú has problems finding a buyer – previous talks with Agrofert have run into problems.
Agrofert owner Andrej Babi is trying to sell its meat-processing unit, but his latest negotiations with the investment group Penta collapsed.
"Unsuccessful sales were rare in the past. In addition, negotiations over sales now take longer," said Josef Kotrba of Deloitte.
Forecast: Decline by one third
Some investors have lost money and courage due to the crisis. "We've seen an approximately 20% decline in demand for companies," said Pavol akan of internet portal TrhFirem.cz, which deals with small and medium-size company sales.
"The market is facing problems because most investors keep the cash, waiting for significant discount opportunities to come up," said Bibby Financial Services head Jan Kudera. A survey by Thompson Reuters agency confirms the trend, saying private investors spent 80% less on mergers and acquisitions last year than in 2007.
The number of company sales and purchases will further fall by about one third, according to the study. "We're expecting the number of sales to sharply fall in the first half of 2009. The owners will wait to sell their company, hoping recession will come," said Mi un.
Investment opportunities this year await only well-prepared buyers. And some of them have already appeared. For example, the investment group Benson Oak run by Gabriel Eichler bought Jablonec-based BTV Plast and printing machine producer Grapo in the fall. The PPF group owned by Petr Kellner is also ready to invest.
"There has been decline in traditional mergers but investors are increasingly interested in purchases related to company restructuring," said Vladislav Severa of Ernst & Young. Jan Spá il of advocacy Ambruz & Dark confirms the trend. "Endangered firms will not be able to pay off loans and banks will seek ways to get rid of them," he said.
Companies operating in energy, healthcare and new technologies do not have to worry, according to the Thompson Reuters study. Their economic growth should not be threatened by the crisis. This does not apply to producers, real estate firms and retailers, which are threatened by the crisis and could become the victims of financial predators.
Source: Prague Daily Monitor
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