The Flipside of Seller Expectations

We’ve been hearing a lot about “seller expectations” lately, particularly as an excuse for why deal activity has been so slow. The poster child for that is Yahoo, but there are hundreds (if not thousands) of potential M&A targets that won’t sell unless the payout approaches what they would have gotten during the bull market of 2006 and early 2007.

I totally buy the theory, but wonder why it rarely gets talked about as a factor in the recent paucity of private equity exits (Yes, there have been some). Aren’t buyout pros and venture capitalists susceptible to overvaluing their portfolio companies? Mark-to-market accounting should help assuage some of that self-love, but almost no investor I speak with believes that such figures are legitimate (“You can’t value a private company using public metrics…”).

Seller expectations go both ways, particularly when the buyers ultimately need to become sellers.