Private Companies Are Hot to Deal.

Private companies are no less interested in mergers and acquisitions than their bigger public brethren. Two-thirds of 211 privately held companies polled by The DAK Group and the Rutgers University School of Business said they plan to sell or merge in the next five years, and 36 percent plan to make an acquisition within a year.

What's driving activity isn't fear, but opportunity, says DAK president Alan J. Scharfstein. "Only one in three of those planning to sell expects to retire, and nearly half say they plan to remain with their company in a non-ownership role," he says. "So they're getting their companies ready for sale. In many cases, this means making an acquisition to give the company greater critical mass and enhance its appeal to acquirers."

Just 6 percent of respondents to DAK's annual survey cited lack of capital as a reason for looking to sell, down sharply from 20 percent last year. Fully 70 percent said the value of their company had increased in the past year; only 10 percent said it had declined.

But valuation is a continuing problem, the survey suggests. Just 26 percent of those polled said they could back their estimate of their company's worth with a professional valuation, while 41 percent confessed they were relying on their "feel" of the market. This weak hold on valuation may reflect the size of the firms surveyed, however, which range from $5 million in annual sales to somewhat over $50 million.