Archives for April 2019

Could the Red-Hot Market for Businesses Be Cooling Down

The economy is red hot, and that fact is translating over to lots of activity in businesses being sold.  However, it is possible that this record-breaking number of sales could cool down in the near future. In a recent article in Inc. entitled, “The Hot Market for Businesses is Likely to Cool, According to This New Survey,” the idea that the market for selling business is cooling down is explored in depth.  Rather dramatically, the article’s sub header states, “Entrepreneurs who are considering selling their companies say they’re worried about the future of the economy.”

The recent study conducted by Pepperdine University’s Graziadio School of Business as well as the International Business Brokers Association and the M&A Source surveyed 319 business brokers as well as mergers and acquisitions advisers.  And the results were less than rosy.

A whopping 83% of survey participants believed that the strong M&A market will come to end in just two years.  Perhaps more jarring is the fact that almost one-third of participants believe that the market would cool down before the end of 2019.

The participants believe that the economy will begin to slow down, and this change will negatively impact businesses.  As the economy slows down, businesses, in turn, will see a drop in their profits. This, of course, will serve to make them more challenging to sell.

The Inc. article quotes Laura Ward, a managing partner at M&A advisory firm Kingsbridge Capital Partners, “People are thinking about getting out before the next recession,” says Ward.  The Pepperdine survey noted that a full 80% of companies priced in the $1 million to $2 million range are now heading into retirement. In sharp contrast, 42% of companies priced in the $500,000 to $1 million range are heading into retirement.  Clearly, retirement remains a major reason why businesses are being sold.

Is now the time to sell your business?  For many, the answer is a clear “yes.” If the economy as a whole begins to slow down, then it is only logical to conclude that selling a business could become tougher as well.

The experts seem to agree that whether it is in one year or perhaps two, there will be a shift in the number of businesses being sold.  Now may very well be the right time for you to jump into the market and sell. The best way of making this conclusion is to work with a proven and experienced business broker.  Your broker will help you to analyze the various factors involved and make the best decision.

Copyright: Business Brokerage Press, Inc.

Marlee/BigStock.com

What Kind of Buyers are You Most Likely to Meet?

Selling a business can be an exciting and rather lucrative time.  But going through the sales process means embracing the notion that you’ll have to be very prepared for whatever might be thrown your way.  A key aspect of preparing to sell your business is to know what types of buyers you’re likely to encounter.

It is only logical to anticipate the types of buyers you may be dealing with in advance.  That will allow you to plan how you might potentially work with them.  Remember that each buyer comes with his or her own unique desires and objectives.

The Business Competitor

Competitors buy each other all the time.  Frequently, when a business is looking to sell, the owner or owners quickly turn to their competitors.  Turning to one’s competitors when it comes time to sell makes a good deal of sense; after all, they are in the same business, understand the industry and are more likely to understand the value of what you are offering.  With these prospective buyers, a great confidentiality agreement is, of course, a must.

Selling to Family Members

It is not at all uncommon for businesses to be sold to family members.  These buyers are often very familiar with the business, the industry as a whole and understand what is involved in owning and operating the business in question.

Often, family members are prepared and groomed years in advance to take over the operation of a business.  These are all pluses.  But there are some potential pitfalls as well, such as family members not having enough cash to buy or not being fully prepared to run the business.

Foreign Buyers

Quite often, foreign buyers have the funds needed to buy an existing business.  However, foreign buyers may face a range of difficulties including overcoming a language barrier and licensing issues.

Individual Buyers

Dealing with an individual buyer has many benefits.  These buyers tend to be a little older, ranging in age from 40 to 60.  For these buyers, owning a business is often a dream come true, and they frequently bring with them real-world corporate experience.  Dealing with a single buyer can also help expedite the process as you will have fewer individuals to negotiate with.

Financial Buyers

Financial buyers are often the most complicated buyers to deal with, as they can come with a long list of demands.  That stated, you should not dismiss financial buyers.  But just remember that they want to buy your business strictly for financial reasons.  That means they are not looking for a job or fulfilling a lifelong dream.  For financial buyers, the key point is that your business is generating adequate revenue.

Synergistic Buyers

A synergistic buyer can be an excellent candidate.  The reason that synergistic buyers can be such a good fit is that their business in some way complements yours.  In other words, there is a synergy between the businesses.  The main idea here is that by combining the two businesses they will reap a range of benefits, such as access to a new and very much aligned customer base.

Different types of buyers bring different types of issues to the table.  The good news is that business brokers know what different types of buyers are likely to expect out of a deal.

Copyright: Business Brokerage Press, Inc.

12587279/BigStock.com

Applicable securities transactions are conducted through a registered Broker-Dealer.
Background of licensed investment professionals can be found on FNRA’s Broker Check.