Mar 09 2011
If the end of 2010 and the first quarter of 2011 is any sign of things to come from a Mergers and Acquisitions perspective, then this year could be a the beginning of a more active season for transactions. The number of small and mid-market transactions valued rose to 33 in the third quarter of 2010 the most since the first quarter of 2009 and almost double the transaction volume in the first quarter of 2010, according to GF Data Resources.
Merger and Acquisition professionals report phones ringing off the hooks– with some companies wanting to buy and others planning to sell. Still other companies are hoping to sell in the next few years and want to be ready when the time comes.
With all this activity, one would expect the number of small businesses sold this year to equal that of years prior to the downturn. Well…probably not equal to pre-downturn years but certainly better than 2010. Although most business intermediaries believe 2011 will be a vast improvement over 2010, the majority of intermediaries polled in a recent survey by www.bizbuysell.com think it will take 18 months for small business sales to reach pre-downturn volumes.
So what does that mean for a business owner?
For sellers, it means you’re more likely to receive quality offers from buyers this year than you were last year. Financing is still difficult for many buyers so although offers may be higher dollar-wise, there probably will not be a significant increase in the number of offers and/or when offers are made alternative financing terms, such as earn-outs and seller financing, will still be a prevalent condition within the transaction terms.
For buyers, as mentioned above, obtaining financing is still difficult, although improving. But for those who can obtain financing, there will be more small businesses on the market to choose from. Many small business owners wishing to sell refrained from doing so in the last few years hoping the economy would rebound, and they would fetch a better price. Thus, pent up demand is always a good time to transact. Lower valuations are still milling about so the cost of buying a Business remains relatively low.
In 2011, many of those small businesses will take the plunge and of those that do and those that ask a fair price have a greater chance of getting that price than they did in 2010.
For both buyers and sellers, as 2011 unfolds, there will be many ups and downs, and twists and turns. I plan to write about them here – report on what’s happening but also add a little of my own insight culled from my many years of experience in the world of Mergers and Acquisitions.
Already in the works are these upcoming entries:
- Inside the minds of sellers – what motivates them to sell?
- Information for sellers on what buyers look for beyond the P&L statement.
- Why this is a good time to buy.
- Do’s and don’ts if you’re approached by a buyer
- Advice from industry professionals for both buyers and sellers
I always equate the world of mergers and acquisitions as an emotional roller coaster, so stay tuned and buckle your seat belt, 2011 may be the year that the ride begins the ascent up the steep track click clacking to 2012.