December 10, 2009

‘Value’ instead of ‘Price’

The most important factor in the sales of your company shares is you, yourself. The sales of your company shares is a personal matter. We at BCMS  always talk about the ‘value’ of company shares and do not use ‘value’ as the synonym of ‘price’. Price is only a part of value.

Before you sell your company shares, please first think about where you would like to see yourself in three to five years from now. Do you want to see yourself at a sea side resort catching fish or still in your company working vigorously? You would not be very happy if your new partner or the new owner of your company wants  you to continue working in the company in three years time, when you really want to catch fish. Of course, the reverse of this situation is also valid. Thus, supposing that you have the possibility of choice, you might choose a potential acquirer that leaves you free to follow your own plans over others even if this potential acquirer pays somewhat less for your shares than the others. The difference between the two amounts is in reality the price you deem fit for your personal expectations in life.

In a meeting that I attended in UK, our client told us the price he wanted to get for his company shares and continued: “Under some conditions I would be willing to sell my shares for an amount 30% below this price.” Of course, I asked immediately, “Under which conditions?” His answer was very interesting. He said, “If the new owners of the company show my employees at least the same care that I have been showing them, then I would be willing to sell my shares at a 30% lower price because my company enjoys its current status as a result of all those people who have worked together with me in the company.” Thus, he perceived part of the ‘value’ of his shares the way that his employees were treated and the effect of this on ‘price’ of the shares was around 30%.

You should keep in mind that such reasons will influence your decision when the time comes for selling your shares. Thus, it is very important to sincerely determine your expectations and wishes concerning your future before you take your company to the market. From experience we know that some shareholders withdraw from partnership discussions because of various reasons, but they say that the price is not up to their expectations. In many of such cases it is easy to understand that the main reason of quitting the process of selling shares is not related with price. This issue is more related with the reluctance of the shareholders to say “yes” to a life style, which they do not find agreeable.

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