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Why I Always Verify Working Capital Needs Before Closing a Deal
When I first started buying businesses, I focused heavily on the purchase price. If I could negotiate the right multiple of earnings, I felt like I was getting a good deal. What I didn’t fully understand then was that the purchase price is only part of the equation. The other critical factor the one that can make or break the first year of ownership is working capital. Working capital is the…
The Mistakes I See Buyers Make When Entering Private Equity Deals
When I started pursuing acquisitions, I thought private equity deals were only for massive firms with skyscraper offices and billion-dollar funds. Over time, I realized private equity at its core is about acquiring, operating, and growing businesses using leverage and structure. That can apply just as much to smaller acquisitions as it does to larger ones. But with that realization came another:…
Het goudlokje is terug - stevenen de markten af op een melt-up?
Het goudlokje is terug – stevenen de markten af op een melt-up?
De aandelenmarkten presteren dit jaar erg goed. Momenteel is er sprake van een mogelijke verdere stijging – een zogenaamde ‘melt-up’ – van de markten. Dat komt omdat er weer sprake lijkt te zijn van een Goudlokje-scenario, waarbij de groei niet te heet is (om inflatie te veroorzaken) en niet te koud is (om de winsten te drukken), maar precies goed. De omstandigheden lijken ideaal, zo…
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Undervalued stock vs undervalued product
Undervalued stock vs undervalued product
By reading about many investors I have realized that looking at an investment case from different angles and perspectives unearth insights which can be very valuable. For example, in a simple DCF framework we value a company only based on its long term cash flows. However, the assets of the company could be used for something totally different and unrelated which can create more value.
There was…
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Advertising Demystified
Trying to gauge the right price for your product or service is a tricky business: charge too much, and no one will buy, charge to little, and you’re cheating yourself. Take some of the mystery out of the equation with this infographic from AdLove. See full story on adlove.com Advertising is a bit like magic in a way. If you do it well you can make something out of nothing; you get to charge…
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AT&T, T-Mobile Deal Will Hurt Consumers & Stifle Innovation
Dan Hesse, chief executive of Sprint Nextel Corp. (S), said he's concerned that AT&T Inc.'s (T) plan to takeover rival T-Mobile USA would stifle innovation and hurt consumers.
[It would give] AT&T and Verizon control of 79% of the market if the deal goes through.
He said this while speaking at a roundtable discussion at the CTIA Wireless trade show today. Both AT&T's mobility chief executive, Ralph de la Vega, and Verizon Wireless (VZ) Chief Executive Daniel Mead shared the stage with Sprint's CEO.
Somewhat unsurprisingly, Mr. Mead had a "curiously low-key reaction to the AT&T/T-Mobile merger plan" (@waltmossberg). The reality is that with control of 79% of the market, AT&T and Verizon will be the big winners, not consumers or their competitors.
Assuming the government does not intervene, it will result in both companies having more pricing power over consumers, suppliers, which will in turn result in the ability to increase their margins/prices.
We don't think there will be a price war between the two big players, as it would hurt them both in the long run. Also, we believe their market share is unlikely to be rivaled by competitors, leaving their pricing power in place.
More specifically, in an industry where infrastructure spending is key to survival, any potential competitors will have to spend big just to provide equivalent service to consumers. Without including spending on advertising, this would be an extremely hefty bill.
This is all assuming that the government will not intervene and that is just one scenario.
On our end, we hope they will, as innovation will suffer due to a lack of competition and consumers will be hurt because of higher prices.
