Beat the rush to the exit
There was an interesting occurrence back in 2012: the first wave of baby boomers started turning 65. Today, with 76 million baby boomers due to turn 65 over the next 15 years in the US, and at least 600,000 individuals reaching retirement age each year up to 2018 in the UK, it’s reasonable to assume a good many businesses are set to put up the ‘For Sale’ sign in the coming years.
Basic economic theory suggests increased supply drives down price and that principal can be loosely applied in this instance, albeit other influences on supply also play a significant part. However, consider this: as large numbers of retiring business owners place their business on the market and buyers become inundated with opportunities, the balance of power in terms of negotiation will largely be in buyers’ favour.
Demand is currently at its highest level since 2007 and promises to continue rising, particularly as economic recovery and development still appear to be in their infancy. Consequently, corporate and financial buyers are flooding back to the market, backed with deep pockets due to years of inactivity and pressure from shareholders to invest.
With demand continuing to grow within M&A market and supply yet to catch up, today IS a sellers’ market. On average, Benchmark International’s deals in 2014 have been attracted at least 5 or 6 serious offers from a range of buyer types, ensuring competitive tension that ultimately drives up value for the seller. Compare this to the 3 or 4 competing offers received on average in 2012 and 2013 and you see how the market is currently heavily in favour of the seller.
As the expected influx of baby boomers flocking to sell their businesses looms, now would appear to be a prudent time for owners thinking of selling their business to consider their options as soon as possible so as to benefit from these positive market conditions.