When It Comes To Selling A Business, Timing Is Everything By Jeff O'Heir, CRN 3:45 PM EST Fri., Feb. 21, 2003 Whether you harbor a dream to sell your solution provider business for the best price and move on to other things or sell it to a larger company and access the deeper resources needed to take your business to the next level, timing is everything, said Martin Wolf, president of Martin Wolf Securities, which brokers the sale of channel companies. Wolf has more horror stories than Stephen King. But he said most of them stem from something he calls "selective psychosis." This, he said, is when "sellers want the last deal they turned down, which is better than the value today." For example, he remembers one solution provider who had it all a few years back, including a Ferrari and a company-owned home. Two years ago he was offered $20 million for his business, but he thought it was worth $30 million. Six months later, he was offered $15 million but thought it was worth $20 million. Six months after that, he wanted $10 million but couldn't find a buyer anywhere. "The fascinating part of the story was that he had everything, got greedy and wound up with nothing," Wolf said. Another example occurred two years ago when Wolf's company offered a publicly traded solution provider $18 million in cash and a $33 million earn-out over two years. The company had $7 million in revenue the previous year and planned for $20 million the next year. "They wanted $80 million, and I told them they were smoking drugs," Wolf said. "It was a good company and a good deal, but they didn't think it was worth $50 million." The company's principals recently approached Wolf to see how much they could get. "We told them we didn't think we could sell," he said. "That's just one of many. If you look at offers these guys turned down, it makes you cry." But there may be less tears and more sanity today. Following the insanely overinflated prices paid for IT companies during the dot-com years, valuations are now more realistic. On top of that, companies with strong services are among the most highly valued in the channel, Wolf said. "Prices are at the bottom of the valuation range, which is positive, because buyers don't think they can get companies any cheaper and sellers have a certain realization that the value today is the value today," he said. "The valuations back then were never at a sustainable basis. Now we're reverting back to the norm." http://www.crn.com/sections/News/Top_News.asp?ArticleID=40110