Has the pandemic affected my business valuation?
This is a question we are frequently asked at present. It really depends on how your business has fared through the lockdowns and the prospects for an upturn as the restrictions on our movement start to relax.
We tend to classify businesses into 3 main categories:
- Businesses which have seen consistent, if not growing sales throughout. Obvious examples include technology providers which enable remote working and certain medical equipment and healthcare providers. Others include DIY materials and equipment suppliers and distributors which have managed the switch to online deliveries. These represent buyers with resilient investment opportunities and will always attract good valuations
- Businesses which have had to close their doors temporarily but have benefitted from the ability to furlough staff during these times. These businesses include engineering & manufacturing, construction, facilities management and commercial cleaning companies, many of which had to shut during the first lockdown but have been able to trade since summer 2020. As a result, these businesses have already been able to rebound and regain more or less normal trading levels. Indeed, many are beginning to see the benefits of the restructuring of their operations, with less use of office space, less travel and more direct sales and supply chains, which is showing in their bottom line
- Businesses which have had to close their doors and are still waiting for restrictions to ease. Obvious examples are hospitality, events and travel. Whilst the early signs indicate a quick rebound as these sectors open up, the long-term impact of the pandemic on consumer activity is yet to be played out and this makes business valuations more difficult to assess at present.
In general, buyers are maintaining a respectful approach to making offers on our sale mandates. They recognise that 2020 to mid-2021 will have been tough for many businesses but that so long as the world continues, established businesses with sound fundamentals will rebound and thrive.
Indeed, there are very few ‘sharks’ circling for the knockdown deal – and those we come across are quickly shown the door.
As widely reported in the press, there is a lot of M&A activity in the market at present. There are a good number of serious buyers with cash funds and the ability to raise further finance. As a result, our clients’ businesses are attracting a high level of interest which in turn leads to good offers. Indeed, there is often stiff competition between buyers, seeking well established and sustainable businesses.
Overall therefore, we are seeing headline valuations and multiples of earnings are being maintained at, if not exceeding, pre-pandemic levels. As with all deals, if there is doubt on the future revenue and profit levels, deals can be structured to mitigate the risk and reward for both buyer and seller.
Would you like advice on the best deal structure for you in the sale of your business?
We would be delighted to offer you a free appraisal and indicative valuation of your business to give you guidance on its value and attractiveness to buyers, the most likely deal structure and whether now is the right time for you to sell. Our appraisal can take the form of either a face-to-face meeting, a web meeting or a telephone call, as you prefer.
Please contact us on 020 8090 9380, email [email protected], or complete the form below to arrange an appropriate time to review your exit strategy and the value of your business in confidence and without obligation.