At some point, business owners will be either selling, giving or closing down their business. And many entrepreneurs looking to increase the value of their business or increase growth in their business or find synergies will be looking to acquire a company. So how is the current market situation for buyers and sellers today?
1) One common theme we are seeing is more and more larger businesses and Private Equity groups looking to acquire small businesses worth $3 million or less. This has not been the case in the past where most Private Equity groups or public companies only looks at deal of $5 million in revenues and up. Most buyers today realize that there are good businesses with long track records available in the small deal sizes as well. Plus there are lots of opportunities for this larger businesses to step in and implement some of their systems and processes to further increase efficiencies and profitability.
2) There are more sellers today trying to sell their business than there are qualified buyers available. VR offices in Alberta, receive about 130 - 150 buyer inquiries a month on the businesses available for sale, but only a fraction of these buyers are deemed qualified or serious. Buyers today need to be educated on the process of buying a business. Individual buyers have no clue what to look at and their advisors - accountants and bankers - does not have sufficient information and knowledge on valuing a small business. You cannot value a small business the same way you value a publicly traded company.
3) The time it takes to close a deal is taking much longer than before. Buyers today are exposed to lots of information and they take their time to complete their due diligence process. The business that is better prepared and uses a Certified Business Intermediary (CBI) to assist with the sale of their business typically enjoy much success since CBI's are well prepared and follows a detailed process of completing a transaction.
So the better prepared a seller is in preparing his or her business for sale the better the chances of closing the transaction smoothly. It is more crucial than ever for business owners to plan ahead to maximize the value of their company.
For more additional information on how to prepare your business for sale, read our post on Identifying the Value in Your Business.