Market Summary FALL 2013
Are you ready to sell?
Third quarter 2013 continues to be a strong brokerage market and, despite uncertainties in the economy and down in Washington DC, we feel that buyer demand will remain high and valuations will continue to improve. In our opinion there are several related issues driving the brokerage market:
1. Inventory remains tight. The number of “Main St.” and lower “Mid Market” businesses available are at a 15 year low.
2. Well positioned, profitable businesses are going under contract quickly, and are often in multiple offer situations with no financing contingencies.
3. Buyers and investor groups have idle cash reserves and are aggressively looking for opportunities.
4. A peak equities market may be forcing investors to look at active investments for higher returns.
5. Despite “hiccups” the economy and labor market are slowly improving and pushing consumer demand and spending.
What does this mean for sellers? If your business is prepped for sale you should see strong buyer interest and final value close to, or at, your asking price. A strong negotiating position will also help you secure favorable terms and allocations.
If you are a buyer, you should be prepared to move quickly when an opportunity presents itself. Have your team ready: accountant, investment advisor, lawyer etc. We’ve had several buyers make offers but lose opportunities because they were unable to move aggressively. Remember, a commitment to a shorter closing timeline can sweeten your offer, and with thorough due diligence, does not cost you anything. Valuation multiples are on the rise, so don’t expect to pay rock bottom prices for a solid business.
Overall, while we rate current conditions as a “Sellers Market”, buyers are still paying average to slightly above average multiples on past performance—not high multiples on pro-formas or future earnings. We maintain a positive outlook on the next year. Long term capital gains are locked into historic lows and we are experiencing a steadily improving economy.
