Selling your business in a flat growth economy
For several years now, most European governments have focused on controlling budget deficits and inflation rather than unemployment and growth. The consequences are slow growth and low interest rates, a situation which is quite possibly set to continue for some years.
What does this mean if you are looking to sell your business?
Many larger companies have improved their profitability over the last few years by optimizing their processes and workforce. These larger corporates now have strong balance sheets (and are cash rich). Whilst banks have much stricter rules on lending and are much less flexible than they used to be, they are still keen to lend to proven management teams for strong viable businesses.
We are certainly seeing signs in our M&A market place of an increased appetite with private investment firms and corporates for strategic acquisitions of SME companies in the UK. Often from outside the UK (e.g. South Africa, India, Australia and the US), these buyers are looking to establish their global presence with the UK often being the first step.
Whilst buyers are still cautious, there is a lack of good businesses for sale and demand is outstripping supply. So if you have a desirable business, now is a good time to sell.
What to do as a prospective seller?
It is unlikely that we will see a sudden rebound to the boom times in the near future. Therefore the idea of waiting to sell until we are out of the recession no longer holds true. Whilst some sectors are doing better than others, (e.g. services vs. retail), businesses are either thriving or declining on the basis of their strength in their own market place.
Whilst many SME firms suffered a significant downturn when the economic crisis hit in 2008/2009, many of our prospective clients (businesses looking to sell) now have two to three years of strong but steady growth and have returned to or are exceeding their performance prior to 2008. This is particularly the case with our core market of precision engineering, IT and telecoms support and other B2B service businesses.
So what this means for the prospective seller, is that the right time to sell is when the business owner is ready and the business is prepared and an attractive investment. It is largely independent of the state of the economy.
If your business has two to three years of strong but steady growth, a pipeline and plan for continued growth and in a strong sector such as engineering, IT and telecoms or other B2B services, there are many potential buyers eager to acquire businesses like yours.