June 23, 2011
Sellers and deal certainty
Today's WSJ has a good example of why sellers are so focused on deal certainty:
Kirk Brundage opened his first T-Mobile store while he was still in college, added seven more in Idaho and Utah over the next half decade, and contemplated expanding into other states.
But by the end of next week, he'll be out of the wireless business.
Mr. Brundage's plans changed after AT&T Inc. unveiled its $39 billion deal to acquire T-Mobile USA. His business was already struggling, and he had considered getting out of it. But once the merger was announced, he decided it was time to sell quickly rather than try to turn the company around.
You hear this argument all the time and there is a certain amount of salience to it. Once a deal is announced, customers, distributors, suppliers, employees all start doing internal calculations about what the future will hold for them with a combined company. Some will decide that the future won't include them and will leave -- customers won't place orders, employees may look for other employment, and distributors, well, if they're like Mr. Brundage, they may decide that the distributorship isn't very valuable anymore. That's the essence of the 'damaged goods' argument that sellers will use to negotiate for deal certainty and why they are so often focused on getting the deal done once it's announced. Can't blame them.
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