Before You Fold, Take a Cue From Yahoo!

CHICAGO -- Yet another celebrity "couple" has hit the skids. After a three-month courtship, Microsoft (MSFT Quote) officially withdrew its bid for Yahoo! (YHOO Quote) Monday, leaving fans of tech mega-mergers devastated.

The numbers being thrown around for this deal may be far beyond the average small-biz sale, but the issues at stake are familiar to any owner tempted to cash out. When does selling make sense? And when does it pay to hold out?

To outsiders, the Microsoft offer might have looked like a gift to Yahoo!, the once-hot Internet company that has spent the past few years struggling unsuccessfully to catch up with Google (GOOG Quote). Microsoft offered $44 billion for Yahoo!, or $31 per share -- 60% more than what Yahoo! shares were selling for at the time.

Even though Microsoft's bid was unsolicited, Yahoo! said its board would consider the proposal. Which made perfect sense -- even though Yahoo! hadn't hung out a "For Sale" sign, an offer from a behemoth like Microsoft needed to be taken seriously.

Beginning of the End

So where did things break down? In the end, it came down to price: Yahoo! insiders thought the company was worth more than Microsoft was willing to pay.

But other factors were at play as well. According to Fred Steingold, an attorney and small-business law expert and author of The Complete Guide to Selling a Business, timing can make all the difference in getting the price you want.

"You want the business to be in good financial shape when you sell," he says. "Ideally, you should be able to show increasing sales and profits for the last two or three years. That will make it very attractive to a buyer."