kiplinger connection
Energy • Firms for Sale • Fires

Energy: The bad news: these are the good old days.
Firms for Sale: It’s a buyer’s market, plan transition now.
Fires: Expect insurers to drive new building regulations.

Energy
Worried about oil prices and how they’re hurting your budget?
Think of these as the good old days. Things will only get worse as years of not doing enough to develop new sources takes a toll. Oil fields often are exhausted within a decade, requiring new ones all the time. But the cost of exploration has gone up tremendously, and oil firms haven’t found enough new oil to match growing demand.
By 2010, spare capacity will have shrunk from 3% of use to 1%.
That’ll mean even greater price volatility, raising the specter of big spikes. Oil could go as high as $150 a barrel within five years.
Reversing the trend will be tough. Energy firms must invest more, protected areas must be opened, and more must be done to conserve fuel.

Don’t count on Congress helping with oil problems anytime soon. Too little time, regional splits, and election politics make an agreement on a comprehensive bill increasingly unlikely before at least 2009.
But lawmakers are afraid to face voters with nothing to show.
They’ll pass an "energy-lite" bill with higher efficiency rules for appliances in homes and industry. But they won’t impose new mandates to force more use of wind, solar power, and biomass to make electricity.
Congress will likely raise auto fuel efficiency regs to 30 miles per gallon by 2012, from 27.5 now, but scrap a bigger move to 40 mpg.
Bush won’t let Democrats add new taxes on oil and gas production.

Firms for Sale
It’ll be a buyer’s market for businesses for several years.
Baby Boomer owners are starting to cash out in growing numbers, with about 750,000 looking to sell by 2009, a 15-fold increase over 2001.
Most firms will go to strangers ... only 15% stay in families more than two generations. Although owners may want to pass the businesses they built on to a son or daughter, children often aren’t interested or may not have the cash that owners need for their retirement nest eggs.
Start planning your exit now to get the best possible price. With a smaller Generation X, there will be fewer potential buyers, so owners may have to cut prices or hang on longer than they want to.

Expert advice is a must. Accountants, attorneys, appraisers, and brokers can all help set a realistic price, find potential buyers, and spot problems. Many buyers ... from competitors to speculators to venture capital firms ... have sophisticated experts on their side. Owners need to match that support to avoid being taken advantage of.
One option that’s growing more popular: Selling to employees. Management buyout teams or employee stock ownership plans can work if owners set them up early. Groom your best managers and train them in the intricacies of the operation so the firm will succeed without you.

Fires
The worst may be yet to come for Calif. and other dry areas.
For years conditions will be ripe for even more devastating fires in other parts of California and much of the parched Southeast. A combination of drought and the tendency of some to put homes in wilderness areas surrounded by trees and brush creates conditions conducive to more fires.
Look for local officials to take steps to mitigate future losses, requiring wider roads for fire equipment and more fireproof materials in home building. They’ll also insist that homeowners clear brush.
If local authorities don’t act, insurers certainly will.