Since mid-2021, the number of businesses being sold is at an all-time high. Some of this increased activity is certainly attributed to post COVID pent-up demand, however the upward trend was taking place before COVID put the brakes on most everything. Excess capital held in PE groups shows there is still plenty of money on the sidelines. This combined with easy credit and eager lenders continue to fuel the market through the first quarter of 2022. But things can change quickly as we know.
The first part of 2022 has seen the transaction pace continue, but the curve is flattening. Unrest in Eastern Europe, higher interest rates, and inflation are all in the news recently. Media hype of these factors can lead to uncertainty. Typically, the marketplace does not like uncertainty.
So how does this affect business sales and valuations? In a recent discussion with bankers and other brokers, guarded optimism was the overall sentiment. Deals are being done but buyers are digging deeper in their due diligence. Low interest rates have been a given for 20 years. To reduce inflation the FED recently raised interest rates. Today buyers are having to take a closer look at the terms of a bank loan. Variable rate loans might actually vary in the future. Buyer valuations are more volatile as people view the future through their own lens. For all these reasons, the deal process is taking longer than it did a year ago. But even with these pressures, deals are getting done.
So, is it a good time sell my business? We firmly believe so at the Crestone Business Group. In the small to medium sized business M&A market, one thing remains constant. Simple businesses that make money will sell. Businesses that people can understand, with verified profits, sell in up or down markets. This a fact. Of course, there are many things that affect the final sale price. Savvy business owners start planning up to 3-years before an exit in order to take the steps to maximize their outcome.
Whether it is a ‘buyer’s market’ or ‘seller’s market’, companies that create cash flow will always be in demand. If you are considering an exit strategy, contact us at Crestone Business Group. We will provide a complimentary valuation and will help you put together an executable plan to meet your goals. Contact Jeff Balch at 719-440-4597 or jeff@Crestonebussinessgroup.com. Steve Coast can be reached at 719-330-4715 or steve@Crestonebusinessgroup.com.