Buyer’s market

Contact: Brenon Daly

It’s a sign of the (dismal) times when an acquirer can offer a 250% premium for the shares of a target, and the stock is below where the company started at the beginning of 2008. (It’s just that kind of year.) That was the case with Vodafone’s $29m offer for Wayfinder Systems, a Swedish company that trades on the hometown Nordic Stock Exchange. According to terms, the British wireless giant will hand over 12 Swedish crowns ($1.44) for each share of Wayfinder, which traded above 13 Swedish crowns back in January. The pairing makes a ton of sense, since Vodafone can use Wayfinder’s GPS technology to offer location-based services. Wayfinder currently has some 2.5 million subscribers.

Given the beaten-down equity markets across the globe, we expect deals like this to be much more prevalent in 2009. The reason? Shareholders have been burned too many times this year by corporate boards that reject offers, saying a bid ‘undervalues’ the company, only to see their share price get clubbed for months on end. (For more details on that, just ask any Yahoo shareholder.)

Although valuations in the private market typically lag those in the public market, the ‘correction’ in how much startups will sell for next year is expected to be severe. According to our ongoing survey of corporate development officers, nine out of 10 say they expect valuations of private companies to decline in 2009. Specifically, 42% say valuations will ‘decline substantially,’ with 45% saying they will ‘decline somewhat.’