Around the Web: A Week in Summary
The following information has been sourced by Business Brokerage Press for the benefit of the business brokerage community. The views of these articles do not necessarily represent the views of Business Brokerage Press. We hope you find this information helpful.
A recent article from Inc. entitled “Small-Business Acquisitions Pick Up Steam With High Demand for Thriving Businesses” discusses acquisition activity and opportunities for buyers coming out of Quarter 2 in light of COVID-19 economic conditions.
While the beginning of Quarter 2 saw widespread mandated closures of businesses and an abrupt pause on deal activity, the end of Quarter 2 saw businesses reopening and deal activity resuming. Some businesses have struggled, some have maintained a relatively normal financial picture, and some have thrived. This varying financial state of businesses has presented a variety of opportunities for buyers.
Essential businesses may be appealing to buyers due to their resilience and growth opportunities. However, buyers may have to pay a premium for these businesses.
Distressed businesses are those that are facing financial challenges but may be able to rebound over time. These businesses may be appealing to patient buyers who are prepared to meet cash flow shortages and are looking to buy at a discount.
Some businesses may be forced to conduct an asset sale, presenting an opportunity for buyers to acquire prime real estate, FF&E, inventory, and other material assets.
A recent article from Financial Planning entitled “5 tips for helping business owners sell during a pandemic” offers advice for business owners who have decided that now is the time for them to exit their businesses.
This advice includes:
- Know the company’s valuation
- Focus on cash flow
- Engage employees and tap into their growth ideas
- Avoid shiny new business opportunities and focus on long-term growth
- Focus on the four intangible capitals – human, social, customer, structural
A recent article from Herald-Tribune entitled “Are you ready to sell your business?” discusses what motivates business owners to sell, what selling options exist, and why so many businesses never sell.
Push factors that lead to the decision to sell include cashing out, peaked market, need to diversify, health concerns, retirement, stress and boredom. Pull factors include philanthropy, starting a new business, hobbies, improving health, family and travel. In general, the presence of more push factors than pull factors is more likely to lead to regret after the sale.
Selling options include an outright sale, transferring ownership to a team, selling only part of the business, transitioning to children, and liquidation.
Of businesses that survive ten years, more than half will never sell and instead shut down. Businesses may not sell due to unreasonable buyer or seller demands, seller misrepresentation, economic uncertainty, lack of capital to finance, insufficient cash flow, no market, or a valuation gap in pricing.