Two business partners (they are twins obviously) are approached by a buyer who would like to buy out each of the business partners of their 50% respective stake in the business.

Together the twins own 100% of the business (each owns 50% of the business), and one twin is offered $5 Million to sell his entire 50% stake in the business and he accepts the offer.

The other twin decides to hold out for a higher offer and ultimately decides to hold onto his portion of the business even though he is offered a higher amount ($7.5 Million) to sell. If each twin has the exact same understanding of the expected cash flows of the business, why would one sell for $5 Million while the other refuses to sell for $7.5 Million? 

Assume that each twin has a finance and accounting background and each twin understands the full value of the cash flows that are generated from their business, and the decision to sell is influenced only on the financial implications and nothing else is factored into this decision (this is a decision to sell made from the head, not from the heart).

Answer rating: 100% (QA)

Answer One twin sells for 5 Million because he places a lower value on his share of the business tha... View the full answer