Tag Archives: risk

WHO BUYS COMPANIES AND WHY

If you are buying a business for the first time, you will find that buying a business is a unique experience that requires extensive knowledge and skills in a broad spectrum of areas–legal, accounting, banking, financing, understanding of government regulations, especially in areas of environment, safety and employee relations.  You must learn how to obtain and screen leads, how to evaluate and price prospective companies, and how to conduct due diligence. But even highly experienced entrepreneurs who have completed dozens of deals still rely upon professional expertise for certain phases of the process.  Thus expect that even after you learn more about the deal-making process, you will still need to hire consultants to assist you in making a successful purchase.

Buying a company is very demanding because it is an intellectual, pragmatic and emotional process, all in one. It is an intellectual process because to be successful you have to think it out.  It is a pragmatic process because you have to be realistic about the company you are looking to buy, whether it is worth buying, what its real value is, and what it should be priced at. And buying a company, finally, is an emotional process.  Throughout negotiations, beginning with first contact with the seller and continuing through to the closing of the sale, you experience tremendous highs and lows. You must be able to handle both extremes of emotion. You must handle the highs, so as not to reveal your enthusiasm to the seller, and after the lows, to be able to come back and find a solution to the problem that might otherwise kill the deal.  The emotional component holds true even after many deals but you do learn to control those emotions with practice.

Reasons for Buying Your Own Business

Some of the reasons for buying your own business are similar to those of any entrepreneur: to control your own destiny; the personal challenge, making money, the satisfaction of building and running something on your own. Continue reading WHO BUYS COMPANIES AND WHY

OPPORTUNITIES

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Dr. John Psarouthakis,
Executive Editor, The Business Thinker.

 

There is no sure way of predicting when opportunity may present itself. Even if you are alert and look for it, there is no predicting when it might come. I know, because an opportunity that changed my professional life came at a time and in a way I least expected it. It was only years later that I fully appreciated the lessons I learned, lessons that I have since used countless times.

I was still a student at MIT, in my senior year.  I was fortunate to get a job at a nearby utility company and once I completed my degree, I continued working there.  In many ways the utility was a nice environment to be in. Some might say it was ideal.  Comfortable, stable, dependable, secure. In other words, for me the utility company was a dangerous place.

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A Free Lunch in a Perfect Storm

Dr. H. Nejat Seyhun, contributing writer to The BusinessThinker magazine, is the Jerome B. & Eilene M. York Professor of Business Administration and professor of finance, Ross School of Business, University of Michigan. He is an internationally recognized authority on financial issues and Derivatives.

As we welcome 2012, it is a good idea to take stock of the lessons of the roller-coaster stock market of 2011. The year ended on a mixed note.  The Dow Jones Industrial Index was up about 6%, S&P 500 index pretty much flat and Russell 2000 down about 4% for the year. Overseas, European and Asian stocks fared worse.   MSCI Europe ETF and iShares S&P Asia 50 Index ETF were both down about 15%.

Investors’ concerns in 2011 were about existential issues.  They worried about a possible collapse of euro, wide-spread European sovereign and bank defaults, and possible global depression.  Investors also worried about disorderly Greek, Irish, Portuguese, Italian and Spanish defaults.  A new term was coined, Private Sector Involvement (PSI), to euphemistically refer to private investor’s losses on their European sovereign debt holdings, a concept that would have been unthinkable a year earlier.  Consequently, the prices of European periphery sovereign debt plummeted and their yields skyrocketed.

Against this dooms day scenario, a surprising bright spot was the U.S. economy.  The U.S. economic picture steadily improved during the year.   The U.S. GDP growth rate rose from 0.4% in the first quarter to 1.8% in the third.  Retail sales increased about 8% year-on-year and unemployment declined from 9% to 8.6%.  Forecasts of S&P 500 stock earnings in 2012 surpassed $100.

Continue reading A Free Lunch in a Perfect Storm