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Most of us have, at one time or another, either purchased or sold something. From a baseball card to a bicycle or a car, we’ve all been involved in such transactions. Some transactions are more complicated than others. For example, selling a car is not as complicated as selling (or purchasing) a home. However, one area where buying and selling can be extremely complicated is the business world, particularly when it involves the acquisition or sale of a company itself.
One of the most important factors that contributes to said complications is the company’s valuation.
Valuation itself is complex. There are numerous determining factors that comprise valuation. Potential suitors view these determining factors through very subjective eyes. Why? Each potential suitor has his or her own vision for the company they are considering buying.
Another highly significant component of selling or buying is timing. When is the best time to sell, and when is the best time to buy.
Here is a very short list of some of the more noteworthy transactions where timing played a key role:
- In 2000, Blockbuster Video had the chance to buy Netflix (which at the time was a mail-order video rental business) for $50 million, but declined. Eventually, Blockbuster faded, closing all its stores as of 2014, with one exception. Bend, Oregon, is home to the only remaining Blockbuster store. Currently, Netflix is worth $550 billion.
- Russia once owned Alaska. In 1867, the Russian Czar Alexander II no longer saw any value in owning it and chose to sell it to the US for $7.2 million. ($157 million in today’s dollars) If you take into account Alaska’s vast natural resources, such as oil and gold, today its value is estimated to be over $500 billion.
- In 1998 (the year it was founded), Google’s owners, Larry Page and Sergey Brin, were willing to be acquired by Yahoo for $1 million. Yahoo chose not to purchase the fledgling company. Four years hence, in 2002, Yahoo again showed interest in buying Google. This time, the price tag was slightly higher- $3 billion. Google countered, saying they would sell for $5 billion. Yahoo declined. Today, Google’s estimated valuation is $2.52 trillion.
- In 2008, Microsoft wanted to buy Yahoo. They offered $40 billion. The offer was declined. Over the ensuing years, industry leadership changed. Fast forward to 2016- Yahoo was acquired by Verizon for $4.6 billion. Ah, what might have been….
Everything else is just history
