Is this the right time to sell? August 2010

Many business owners who were considering the sale of their business in 2008 – 2009 have contacted us to ask if now is a good time to reconsider selling. A common theme coming through from these business owners is – “it was a tuff road we just walked down – mentally, physically, emotionally and financially - and I don’t want to do it again”.

We are seeing good signs of the economic recovery for almost 10 months (notwithstanding comments by some about a double dip recession). While there is still some uncertainty in North American markets, for the most part the businesses we visited in the past 6 months have adjusted well to the new reality.

They have trimmed costs and repositioned some product lines / service offerings and, even though there are many instances where top line revenues are still 20% below 2008 levels, most businesses have returned to profitability.

In addition to our experience in the market place (in the past 8 months I have closed 5 transactions), there are also good fundamental reasons to suggest that selling today is a sensible strategy – for example
> Just as sellers are re-engaging in the market, we are getting an unprecedented number of inquiries from business buyers – both financial and strategic;
> While I don’t foresee valuation multiples increasing, I do see enterprise values increasing as the cost savings and streamlining that businesses did over the past 2 years find their way to increased profitability, and
> Buyers are very aware that if a business could survive the events of 2008 and 2009, then the business must have a robust business model and hence a much lower risk of future failure.

It is unlikely that we will see the buying frenzy that we saw in the mid 2000’s, but there is a solid / active market today for those wanting to sell.

If you would like to explore this further, contact me at doug.nix@cfaw.ca