23 Aug It’s a Buyers Market!
Business profits are down. Ditto for multiples. The result is a double whammy on pricing. For this reason it’s a great time to buy. Not so much for selling. So after years of a seller’s market we now have a buyer’s market. It’s time to make acquisitions.
Where to look? To be sure, many would-be sellers are going to wait it out. But there are still deals to be made.
Find a Non-Financial Seller
Don’t kid yourself. There are business owners – typically those who are still active in the business – that have or will decide they want to sell and they’re not tremendously price conscious. Sure, they want a fair price for their business, and they lament they did not sell two or three years ago when prices were high but they are not going to wait another three to seven years just for the possibility of getting a few more million dollars. In short, they value their freedom more than the money. Heck, they already have a lot of money. Many millions. They’ve decided that it’s time they move on but what’s holding them back are the obligations of business ownership. So, “let’s get what we can,” they say, and get on with the next chapter of life.
Locate the Over-Leveraged
Most of the third party transactions getting done are with sellers who have to sell for financial reasons. Typically, it’s a company with too much leverage. They’re facing insolvency due to insufficient cash flow caused by excessive debt service requirements (as opposed to poor operating cash flow). Now’s the time to pick up some good companies that might not otherwise be available.
Exercise on the Buy-Sell Agreement
You have a partner and a duel buy-sell agreement in place. Either could exercise. Maybe it’s a take or pay type option. Well, if you’re intent on buying, now might be the best time. Valuations are down. Exercise your option.
Clean-up the Stragglers
Over time, shares of stock can end up in the hands of many. It’s a nuisance. Times are slower now and you have a little extra time. Some of your shareholders may also need some extra cash. So make a run at buying them out.
You’re a 50-50 partner in a joint venture. Or you have a distributor or vendor you’d like to acquire. You have leverage, no doubt, and now might be the ideal time. The purchase of companies you are already involved with is a lower risk endeavor. Banks – skiddish today – will more easily get comfortable with this type of transaction.
You’ve waited for years for the tables to turn. They have now. So what are you waiting for? It’s a buyer’s market. Get off the dime and clean up your shareholder list. Acquire the rest of that company. Locate the over-leveraged or the non-financial seller. When the good times return you’ll be glad you did.
Acquisition Advisors has facilitated transactions of each of these types. Call us. We can help.