Category: Helpful tips for SME's | Preparing to sell a business
Sat 17th March 2018
In the first quarter of 2018 we have completed 5 deals and secured offers on another 3 mandates. There is currently strong demand for the majority of our sales mandates, and we see conditions being very much a seller’s market. There are many buyers and too few acquisition opportunities.
The number of business owners deciding to sell has remained steady if not slightly declined, but at the same time there is an increasing number of buyers with funds actively looking for businesses to acquire.
In replenishing our stock of businesses for sale in 2018, we remain confident of achieving successful sales of our clients’ businesses and here is why:
- Despite the uncertainty caused by Brexit and other world events, the global economy is growing and our clients’ businesses are generally busy and growing too.
- With continuing confidence amongst business owners and investors looking to expand their businesses, acquisitions represent an immediate means of achieving compounded growth.
- There remains a high level of cash reserves in both trade buyers’ companies and investor groups’ funds, ready to acquire profitable businesses.
- Interest rates remain low driving further the desire for acquisitions with high ROI.
- More buyers are now able to raise finance to fund their acquisitions which opens up the market to a wider pool of buyers.
Which businesses will sell well in 2018?
Whatever the economic conditions when it comes to sales, mergers and acquisitions in the SME market, certain factors hold true. Businesses which sell well typically have the same traits, they:
- Operate in a niche market with strong barriers to entry
- Have consistent recurring revenue, with clients often locked in by a service contract
- Have strong profit margins
- Demonstrate tangible growth and opportunities to expand
Such businesses include the sectors listed below. This is proven by the acquisitive demand for such businesses that we have seen over the last 3 years or so.
- Precision engineering for aerospace, automotive and food processing markets
- Facilities management, building security & fire systems, and commercial cleaning
- Software development and Software-as-a-service (SAAS)
- IT support and telecommunications
- Logistics and distribution
We have hundreds of active buyers on our database and consistently receive at least 70 enquiries for each business we market in these sectors.
Good businesses with sound returns will always sell well. It is also best to sell while you are still successful and enjoying it.
Do you have a business in one of these sectors?
At Hornblower, we like to start dialogue with our clients 2 to 3 years in advance of when you are looking to selling. We are always happy to offer advice on valuation and what performance metrics you need in order to achieve your desired deal value, as well as offer general advice on the various options for exiting your business and when is the right time to sell.
Contact us for a free business appraisal.