Comment, question or quotation of the day

28-11-2019 : Quote of the day

“Liquidity is there until it is not - that is the reality of modern markets.”
Jim O'Neil

27-11-2019 : Auction or private negotiation ?

  A few weeks ago, the listed investment company Wendel announced that it had taken control of Crisis Prevention Institute, a US company, for 23.3 times its EBITDA. This is obviously not cheap, but a double-digit growth company, resistant to the crisis and with high margins (EBITDA is $39m for a turnover of $86m) does not come cheap nowadays. This acquisition was made by mutual agreement, without a private auction process, which shows once again that the price obtained does not necessarily depend on the chosen negotiation process and that private negotiation also makes it possible not to sell off a company! In fact, in the minds of many, private auctions are synonymous with value maximization, much like Christie's with the Salvatore Mundi painting of Vinci. The scientific analysis has shown that this first impression is false and that the price obtained for the sale of a company does not depend on the sales process, as the example of Wendel illustrates again. For the scientific reference, see The Vernimmen.com Newsletter of November 2007, n° 28. Our 38 years of cumulative experience in mergers and acquisitions does not tell us a different story.   On the other hand, if you want to demonstrate to third parties (a shareholder, a board of directors, a regulator, etc.) that you have made every effort to obtain the highest price for a subsidiary, the choice of private auction will of course be the easiest to defend, even if it is not based on reality.   Have a nice day.  



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The Vernimmen.com Letter

Number 124 of November 2019

News : Financial analysis of listed groups in West Africa

Statistics : Liquidity and debt of top 60 groups worldwide

Research : CSR and competition: can socially responsible companies survive?

Q&A : How can a borrower manage the duration of a bond flexibly?

COMMENTS : Comments posted on Facebook