2016 Bodes Well for Buyers AND Sellers
Most experts say the U.S. economy will stay fairly stable in 2016, with performance similar to 2015’s. Dave Seitter, a partner with Spencer Fane LLP, and Doug Hubler, with Apex Business Advisors, teamed up to fill you in on how the year looks for business buyers and sellers.
M&A market will stay strong
Dave: This year’s economy is probably going to be similar to last year’s. So there’s still a lot of money sitting on the sidelines looking for places to play. Venture capital and private equity firms are driving up demand.
Doug: The uncertainty in the stock market and the volatility in oil prices also make business transactions more attractive investments.
Dave: But it also means those business buyers are looking for a pretty healthy return. They’re taking on more risk than they would in the market, and they expect to be rewarded for it. I’d say they’re seeking deals that can return 25% or more.
High retirement rates support business transactions
Dave: People are working to more advanced ages these days, but we’re still going to see more people retiring each year than ever before. And that means a higher rate of transition among small and medium-size businesses.
But business owners who are planning that transition don’t have to look at it as an “all-or-none” prospect. They may want to start planning for a gradual transition – reducing the hours they work or turning over pieces of the company to someone who may be ready to take over later.
Doug: Selling a partial interest and planning a transition over time is a good strategy and can be a comfortable one, especially for private equity groups. They like keeping a trustworthy, competent leader in place who can help their investment grow.
Selling or buying a minority interest has pros and cons
Dave: I agree that selling a minority interest is a good way for the owner to realize some liquidity while maintaining some control. But it can come with a price!
Doug: I would caution sellers to be careful about picking the right partner for that kind of transition. Interview past acquisition partners about how smoothly it went. And make sure the buyer has the capital necessary to make ongoing investments in the business.
It’s never too early to start talking
Doug: If you are even thinking about selling part or all of your business this year, now’s the time to start talking to your advisor. We can help you consider tax implications, improve the business value, prepare your books and consider how to position your company with potential buyers.
Altogether, the year ahead looks favorable, whether you’re looking for a business investment or wanting to transition out of your ownership role. The opportunities are there for the taking!
If you or someone you know is interested in buying or selling a business, please call us at 913-383-2671 or contact one of our Apex Business Advisors today!
