Published June 16, 2009 at 9:29 AM
The biggest obstacle to getting deals done in the current economic environment is not the lack of financing, it's actually having buyers and sellers agree on a price, said Joel Papernik, a partner with Mintz, Levin, Cohn, Ferris, Glovsky and Popeo PC. "Valuation is the biggest factor" in the low levels of M&A. That's no surprise to any dealmaker in the market right now. As we reported in our recent feature "Out of kilter," the three basic yardsticks dealmakers and investors have relied on to determine valuation -- comparisons with public company stock prices, comparisons with relevant transactions and a discounted cash flow analysis of the company itself -- simply aren't working well.
Still, companies are finding ways to overcome wide gaps in bid-ask prices. In this edition of Inside The Deal, Papernik says some sellers are choosing to sell assets or equity rather than the entire company with the hope they can get a better price down the road, and some transactions are being structured with price resets attached to outside indexes. See the video below or download it at iTunes. - Suzanne Stevens