[bell-cot]

There's vastly more profit in buying a few companies at 33 paise on the rupee than in buying lots of companies at 99 paise on the rupee. And coordinated punishment of any newcomers - who try to disrupt a status quo of systematic underbidding - does not even require communication between the incumbents.

[smcin]

What exactly is the coordinated punishment of newcomers?

[bell-cot]

The simplest tactic is to bid up anything they're trying to buy to 101+ paise on the rupee.

[lotsofpulp]

Then who is buying at 33 paise? You are contradicting yourself.

If something “worth” 1 rupee is not selling for 1 rupee,then the logical conclusion, absent collusion/cartel/monopsony behavior, is that it is not worth 1 rupee or even 99 paise, but rather the 33 paise that it is selling at.

[bell-cot]

The established players - and occasional well-behaved newcomers - are buying at (say) 33 paise on the rupee.

The "1 rupee" is what the business would be worth, in a highly efficient, open market. Which this market clearly is not. And the regulars are quietly colluding to keep it that way.

[lotsofpulp]

The context of _rm’s post is not about the OP’s dad’s specific business in its specific regulatory environment which may or may not constitute a “highly efficient, open market”.

> lot of these solo owners who build up a business over the course of many decades serious underestimate how hard they are to sell, and have an unrealistic idea of what valuation they'll be able to get.

From this, I get the sense that _rm was talking about owners of niche businesses that are surprised to find a smaller market of interested buyers, and hence are surprised they cannot sell their business at a price they hoped to get.

My point was simply that just because a seller cannot get a buyer to pay the price they hoped, that does not make the buyer a “bad” person.

[bell-cot]

> My point was...

Quite true. And it's possible that (due to regulatory/tax/social/etc. factors in India) small businesses could only be sold at large discounts to their "Wall Street theoretical" values - even in a perfectly efficient market.

I originally commented in response to amadeuspagel saying "If there's a whole industry of them, shouldn't there be lots of competition to buy these companies?" - by pointing out a simple way in which the market could be very inefficient.

Yes, even if there's a carved-in-stone rule that businesses sell for (say) 10X their annual profit, there will be plenty of business owners who imagine that their business is somehow the exception.

Related is the problem of owners misrepresenting their businesses to potential buyers. Which would lead perfectly rational and honest buyers to offer them far below 100 paise on the rupee, due to the risk of being swindled.