Market Update Fall 2016
Historically Q3 is the slowest month for M&A activity but 2016 proved to very active both in terms of seller activity and closings. We feel that this continues the slow, inexorable trend of baby boomers looking to retire. We are still strongly recommending that owners looking to sell in the next 5 years to start the process now. At the least, meet with advisors to get a sense of business value, the tax implications of a sale and retirement/post-sale financial needs. Businesses are at the bottom of the “liquidity scale” so you can’t assume that you will sell quickly when you are ready to retire!
What’s “HOT”: Healthcare related businesses continue to draw the most buyer interest. E-Commerce and niche product businesses also have high appeal.
What’s “NOT HOT”: C-Stores, small corner markets, gas stations and small rural restaurants are drawing little, if any, buyer activity. Small sized trade businesses are also drawing very little activity.
Seller Advice
It’s a good time to sell. Interest rates are low, financing is available and opportunities for sale are at an all-time low. Valuations multiples are pushing into the 3x range, but still applied to 3 year historical averages.
Buyer Advice
Given the availability of third party financing, sellers don’t need to provide much, if any, owner financing. If you are looking for a performing, profitable business don’t expect a fire sale or an owner to hold a significant amount of paper. Make a solid, fair offer with a timely closing date.
