WorldWide Drilling Resource

65 WorldWide Drilling Resource ® NOVEMBER 2013 )0 -4 --*22** !.*-/ ) *)"!-!) ! !)/!- '!3 ) -% $! 0'! 0) 4 !#%./- /%*) +!). * - *" %-! /*-. !!/%)# +! &!-. ) *.+%/ '%/4 %!. -*#- ( *) *) 4 *) 4 $! 0'! !#%./- /%*) ) !' *(! +! &!-. - ! $*2 ),0!/ 0 /%*) ) .%)* %#$/ 0!. 4 -! &" ./ ) ))0 ' !!/%)# ./ -!.% !)/. !!/%)# ) * - *" %-! /*-. !!/%)# *- (*-! %)"*-( /%*) 1%.%/ *0- ! .%/! 222 (22 *-# %))!.*/ /!- !'' ..* % /%*) )) ))0 ' - ! $*2 *)1!)/%*) 25% of Family- Owned Businesses will Change Owners in the Next Five Years? Part 2 Adapted from Information by Alliance Capital Corporation Last month, we covered the pros and cons of business valuations and discov- ered they are not always as important as one might think. So, what determines company value? Timing - In some industries, values can change dramatically in a very short period of time. Products, programs, and services vary with the needs and de- mands of the times. A valuation done six months ago may be worthless today. An oilfield drilling company, sold two years before the latest boom, may have sold for three times earnings. Today, the same company could sell for six times earnings. Timing is critical. Companies sell for the most when the demand for its services are growing. The marketplace is king! - The market for business can change daily, based upon demand and money supply. According to David Mahmood, founder/ chairman of Allegiance Capital, “Right now, there is more money in the market- place than at any time in U.S. history. In- vestors have the funds, and they are looking for solid companies to buy. Now is the best time to cash in,” he emphasized. New competitors coming into the market also impact the value of your busi- ness. If you develop new technology or if new technology replaces your services, the value of your company changes. The market drives company values. Therefore, buyers pay little attention to a valuation purchased from an appraiser. They will do their own due diligence and determine what they will pay for the company. An uneducated seller, acting alone, is at the mercy of buyers, because normally, they have not calculated the impact of the marketplace. Buyers determine value based upon their own needs - Different buyers look at the same company differently. Strategic or corporate buyers may see more value in a company that fits into their growth strategy. Strategic buyers also bring leverage from economies of scale, established sales teams, customer rela- tionships, and distribution channels. For example, a European company looking to expand in the U.S. may be willing to pay a premium for the right company. The auction process yields the best results - An auction process can also increase company valuation. When a company is represented by a well- known, experienced investment banker, buyers know they are working with a firm that has done research to determine the market value of the company. The final price will also be influenced by the marketing process used, which brings several buyers to the table and forces them to compete on price, conces- sions, and deal structure. Managing the process, controlling buyers, and putting them in an auction-style scenario secures a premium price. The business valuation has nothing to do with the final price. The auction process, managed by an invest- ment banker, ensures you maximize your value in the market. The value of your company will be In Memoriam Norville Duane Petersen (1945~2013) Norville Duane Petersen of Mt. Iron, Minnesota, passed away September 7, 2013, after a long battle with cancer. He was born in Blackhoof, Minnesota, in 1945. After graduating from Mt. Iron High School, he attended Virginia Junior College, then earned a degree in education from the University of Minnesota Duluth. Norville was a teacher and principal prior to joining the family business of Petersen Well Drilling. He was a member and president of the Minnesota Water Well Association, member of the National Ground Water Association, and had served on the board for the Minnesota Department of Health. Sharing his time and talents to help others, Norville worked in many organ- izations including the Salvation Army, Water for Africa, and Wells in Haiti. Norville is survived by his wife of 46 years, Wanda; son Todd; three grand- children, and extended family, including his beloved pets. The management and staff of WorldWide Drilling Resource ® extend their sympathies to Norville’s family and friends. 25% cont’d on page 66.