Oh prices, where art thou?

The mismatch between what vendors expect to fetch for their companies and
what investors are willing to pay continues. Six of 10 respondents to an online poll
conducted by unquote" felt that prices hadn't come down enough to reflect the current
macroeconomic outlook.

While there are some indications that the debt markets are thawing, vendor pricing
expectations have become the real obstacle to completing deals. Advisers speak about
how there is no guarantee that when a sale process begins it will always be successfully
concluded, with vendors often pulling out even in advanced stages of the process.

As part of what slows down a sale is price negotiations. "Judging by the sales processes
we've been taking part in, the multiples are coming closer together, but mostly because
the extreme outliers are gone, and the average still continues to be fairly high," comments one small-cap investor.

The resilience in pricing is largely due to vendors feeling that current prices do not represent the true value of a company, leading sellers to hold their assets for as long as possible. This is also true for private equity owners, who are reluctant to sell, but at the same time are beginning to feel the pressure to invest. This will boost competition for strong assets, which can again drive up prices. Meanwhile, strategic investors are sitting on large cash reservoirs after saturating themselves with cash on the bond markets and are willing and able to pay a strategic premium.

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