Want to sell your small and moderately troubled DM company?
You can do it, despite the fact that we’re in an M&A trough. Just don’t expect to get the multiples you would have gotten in 1999.
That was the opinion of two investment bankers and a direct marketer with an investment background, speaking yesterday at a Winterberry Group breakfast.
Despite reports to the contrary, capital is flocking to turnaround companies, “but they are not getting the valuations they hoped for,” said Glenn Kaufman, managing director of American Securities Capital Partners.
And most buyers are looking for large companies.
“Size does matter,” said Ronald S. Altbach, CEO of Cross Media Marketing.
“Micro businesses are an anomaly in the U.S.,” added John Prunier, president of Petsky Prunier LLC. “They rose in 1999 and 2000.” Many were Internet companies with “little more than a business plan and a little money,” he said.
All the panelists agreed that transaction activity has slowed down to a crawl. And even when deals have been done, “the cash-is-king economy has prevailed,” said Kaufman.
What’s more, multiples are down. Kaufman estimated that they are 1 to 1 1/2 times lower than they were 18 months ago. And Altbach added that valuations again are reasonable, “as opposed to the multiples being sought in 2000 or even early 2001.”
Will the DM investment market come back?
“I do believe it will come back sooner than other industries, because of the variable cost for marketing companies
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