Will 2019 be a good year for selling your business?
Outlook for sales of owner managed businesses in 2019
Questions we are often asked by prospective sellers of businesses, are “What is the market like at the moment?” and “Is Brexit affecting buyers’ appetite for acquisitions?”
From our perspective, appetite for acquisition remains strong. As of January, out of the seven new sale mandates we put on the market in the last quarter of 2018, three are already under offer and there is serious interest in all four of the others. The year 2019 in our view is certainly set for a good level of business sales and overall M&A activity.
Whilst Brexit dominates the news and is a much talked about subject in social conversation, we find that buyers rarely bring up the subject. Focus remains on the sustainability of the business in terms of its management, key customers and prospects for growth. Whilst there are varying views on the impact of Brexit on the economy, buyers tend to remain positive about the future.
In replenishing our stock of businesses for sale in 2019, we remain confident of achieving successful sales of our clients’ businesses, and here is why:
- Despite Brexit and other world events, our clients and contacts in the engineering, construction and business services sectors report that they remain busy and expect ongoing growth in demand.
- There are a good number of infrastructure, building and engineering projects underway in the UK. Whatever direction Brexit takes, there is general consensus that the government will be keen to bolster the economy by ensuring these projects continue to be funded.
- 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 2019?
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
- HVAC, refrigeration and vending / catering equipment maintenance
- IT support and telecommunications
- Software development and Software-as-a-service (SAAS)
- 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.