On a brighter note: “One of the few good things about a recession is that it provides a chance to reconsider basic valuation assumptions affected by the depressed economic environment,” writes R.J. Dragon in his blog RJ on BV. “Business valuation experts can get a quick update by reviewing some of the popular references in our profession. So when the 2010 edition of Mergerstat Review arrived, it was time to see how things changed in the “Great Recession” of 2009.”
Here are some of the Dragon’s analyses:
- It appears that many sellers of privately-held companies are not keeping companies “off the market” waiting for a return to pre-recession valuations: The sale of privately-held companies is still the biggest category of M&A transaction, accounting for 51% of acquisitions in 2009 versus 55% in pre-recession 2007.
- Control premium rises when earnings are depressed and drops in boom years: Control premiums in this recession have risen to approximately 40%, the level also seen in the 2000-2001 recession.
- Private equity is a major force in the markets and a determinant of business value: private equity firms are still winning a larger percentage of larger deals.