Do I sell my company now or build it for 2 years more?
This is a question often posed by owners contemplating the sale of their business in good economic times. Whilst the long-term impact of the Covid-19 lockdowns on many SME businesses remains to be fully assessed, this question will become much more prevalent in the coming months for those who were considering the sale of their business at the start of 2020 but have postponed the decision to sell over this time.
The answer will lie in whether what they are able to achieve in the next 2 to 3 years will actually add value compared to what they could achieve were they to put the business on the market for sale now.
From the deals we have completed through 2020, since the first lockdown, in most cases we have achieved the valuations we would have expected pre-Covid.
This is primarily due to the sectors in which they operated being somewhat immune to the effects of lockdowns and social distancing measures. Many Engineering, Manufacturing, Facilities Management and Construction sector business have maintained and grown sales and built up strong order books. Digital technology and SAAS businesses have also thrived.
In the one case where our client’s business was affected more significantly, seeing a dip in ongoing monthly sales of 80%, the deal valuation achieved was only 20% lower than the buyer had offered a few months prior. This was in the main due to the unique market position and barrier to entry that our client held in the market place, and the confidence that the buyer had in the return to normal trading when we eventually come out of lockdown. Read Case Study.
In general, we are finding that serious buyers are taking a responsible approach to acquisitions and understand that business owners are simply not going to accept low offers due to the short term impacts of the pandemic. As with the stock markets, buyers of SME businesses generally remain positive about the future – otherwise why buy a business at all irrespective of the price paid?
There is much talk about “building back better”. Mergers and acquisitions allow this to happen by bringing new ideas, resources and capital to existing businesses with sound fundamentals and potential to expand. If your business has suffered a downturn due to the pandemic, but still has sound fundamentals, selling now may not only enable your planned exit, it will enable your business to thrive well into the future and provide security and opportunity for your staff. Deals can also be negotiated where you share in the upside.
The mid to long term impact of the pandemic on the economy is yet to be seen and with high levels of unemployment forecast, business closures in the retail and hospitality sectors, a sale now may well be prudent to de-risk your own future wealth.
Please contact us for a free review to assess the full potential value of your business and how we can help you secure your future.