kidmercury

As regular readers know, I'm in the midst of acquisition discussions regarding my trading site. Here are some observations/reflections:

1. Know your morals regarding what you will and won't do, who needs to get paid, what promises were made that need to be honored, etc. If you don't have your values properly identified, you will end up deceiving yourself.
2. Know your options. This is especially important if you are going to try to bluff. If you don't have options, be creative and create some. No options = no negotiating power.
3. Before bluffing, remember that you'll need trust as well. So, bluffing is not always a risk-free move. It can deteriorate your chances of earning trust, even if it causes the subject to think "is this person bluffing" which they most likely will think even if you are not.
4. Valuation is especially tricky in our current times when the global economy is all messed up. A common valuation method is to look at publicly traded equivalents to see what the market is pricing them at. I am in the Internet information sector in the US, which has an industry P/E ratio of 136.8 (which basically means the market values companies in this sector at 136.8X the individual company's annual earnings....so if your company earned $1 in profit for the whole year, the market would price the whole company as being worth $136.80). The 136.8 P/E ratio reflects how overvalued US equities are, so I would certainly expect private companies to sell significantly below the corresponding ratio for their sector.
5. Of course for a small business the real value of an acquisition comes when an acquirer can deeply integrate the acquired company in a way that creates exponentially greater value. This is a huge point and creates a lot of barriers to acquisitions -- the acquirer needs to feel comfortable this can happen, which is often a tough sell, and rightfully so. As a result I think there's a huge opportunity for a company that can find a way to reduce the integration cost of acquisitions. I think platforms are a way this can be done, and thus I see platforms and microfinance as going hand in hand.
6. The biggest barrier is social networks. If you have the right connections, it's easier to get the trust you need and it's easier to get in front of potential acquirers. If you don't.....good luck. Of course it is the same in virtually all aspects of life; getting what you want is more about who you know rather than what you know (with the exception of knowing yourself...that's always top priority, of course).

So, these acquisition talks take a while. Even those who talk a big game and are like "we move quickly" actually....don't, at least from what I can gather in my limited experience. But in many ways I don't mind, because my trading site is now on the growth track, and so the valuation only goes up, and my available options only grow, so long as this path is maintained.