Why There Are Big Opportunities in the Marketplace to Buy a Smaller Business
Acquiring the right kind of smaller firm offers very compelling economic rewards. These well established, enduringly profitable businesses offer fewer risks than start-ups and greater professional independence than working in someone else’s company. Thousands of these small firms come up for sale each year, principally as founders retire, and they require buyers who can organize the capital to complete an acquisition and have the ability to run the business as its CEO. Plus, the market for these firms is highly fragmented and information about the private companies is difficult to obtain. As a result, these smaller businesses typically sell for 3 to 5 times pre-tax profits, roughly half as much as for a larger firm. Our talk introduces you to this opportunity. It also provides guidance to owners of smaller businesses that are interested in selling their companies and potential investors in small business acquisitions.
About Professor Ruback
Richard S. Ruback is the Willard Prescott Smith Professor of Corporate Finance at the Harvard Business School. He is currently focusing his research in applied corporate finance, especially on corporate-control transactions and valuation. His course development work parallels his research interests. He has taught a variety of corporate finance courses throughout his career. Over the last few years, he and Royce Yudkoff have been developing and teaching a new second year case course titled “The Financial Management of Smaller Firms” and a field course called “Entrepreneurship through Acquisition”. Recently, Ruback and Yudkoff published their book, HBR Guide to Buying a Small Business. Published by Harvard Business Review Press, the book is a practical roadmap through the steps required to find, evaluate, negotiate and finance the acquisition of a smaller firm.
Ruback earned his Ph.D. in business administration at the University of Rochester in 1980 and taught at MIT’s Sloan School before joining the HBS faculty as a visiting professor in 1987. He was appointed associate professor in 1988 and full professor in 1989. Ruback has served as an editor for the Journal of Financial Economics and is the author of numerous articles on corporate finance and valuation.
Ruback has served as a consultant to corporations on corporate finance issues and has acted as an independent advisor to outside directors. He also served as an expert witness on valuation and security issues.