Why Private Company Owners Sell to Multinational Corporations
By William Cate
July 2004
[
http://home.earthlink.net/~beowulfinvestments/]
[
http://home.earthlink.net/~beowulfinvestments/globalvillageinvestmentclubwelcome/]
Your multinational corporation's mandate is to buy private companies. You want to build your public company's revenues to US$100 million/year. Then, you'll sell it to a stronger multinational corporation.
Why would any private company owner want to sell their private company to your multinational corporation? Why would any owner of a private company accept publicly traded shares for their assets? The answer is simple. You are offering the sellers the best possible price and terms for their private company.
You Are Paying a Multiple of the Value of their Private Company's Balance Sheet Value
Assuming that 75% of the private company sale was in publicly-traded shares, the sellers received anywhere from 75% to 150% more for their company than they would selling to another private buyer. On average, you are offering twice as much money for the private company as other buyers.
You Are Paying the Seller in U.S. Dollars
The American Dollar is one of the five world currencies. It's freely convertible into any other currency. It's accepted almost everywhere in the World. The national currency, used by a private buyer, is often only acceptable in the country of the buyer and seller.
The Seller Can Be Paid Anywhere in the World
Subject to local laws, the seller can be paid anywhere in the world. This means they can accept payment in a country that doesn't tax foreign-source income.
The Owner Has the Option of Working for the Multinational Corporation.
Selling a private company doesn't necessarily mean retirement for the owner. It can mean managerial involvement in the multinational corporation.
The Seller Has the Option of Becoming a Canadian Citizen
Taking this option and using Canadian tax laws could end income
taxes for years, if not permanently. In many cases, the seller can live in the country in which they were born, if they choose to do so.
The Seller Limits Inflation Risk to that of the US Dollar
If the local currency is undergoing high inflation, the loss of buying power in a few years means the private company sellers earn nothing from the sale of their company to a local buyer. A 6% annual inflation rate is better than a 200% annual inflation rate.
The Benefits Are Inescapable
The benefits of selling to a multinational corporation are self-evident and overwhelming. The advantages should attract potential private company sellers in droves to any multinational corporation.
The only limiting factor to private company interest in selling to a Beowulf Program multinational is the limited liquidity of the multinational company's shares in the American Market. However, this liquidity will grow as the VCP multinational corporation moves from the Over-the-Counter Market to Nasdaq or a Regional U.S. Stock Exchange.
Given that the private company owners will sell their shares to a major multinational corporation at the time of Acquisition, the liquidity issue should be a secondary concern for most private company owners.
To contact the author: Visit the Beowulf Investments website: [
http://home.earthlink.net/~beowulfinvestments/] Or, visit the Global Village Investment Club Website:
[
http://home.earthlink.net/~beowulfinvestments/globalvillageinvestmentclubwelcome/]
About the Author
He has been the Managing Director of Beowulf Investments [
http://home.earthlink.net/~beowulfinvestments/] since 1981 and is the Executive Director of the Global Village Investment Club [
http://home.earthlink.net/~beowulfinvestments/globalvillageinvestmentclubwelcome/]
