Market Report Spring 2015

April 26, 2015 by brian

Tax filing deadline is behind us! As usual we are seeing a significant uptick in buyer and seller activity now that we are past tax day. Maine Business Brokers has closed over $5M in deals in the 14 weeks: a very strong start to another record year!

Internally we are achieving a 73% sell rate which is double the national average. More telling is that we have successfully closed 93% of our deals that went under contract over the last 24 months. This is indicative of a number of factors: quality of buyers, access to credit, accurate valuations and pricing of businesses and willingness of sellers to offer some financing to get a deal closed. Maine Business Brokers has strived to improve our “closing systems” and our efforts have paid off. I discuss this in more detail in my latest blog: “Managing the Closing”.

Maine

The Maine market continues to improve but in general about 20% of total opportunities are salable and half of those will go under contract quickly due to strong buyer demand and shortage of attractive listings. A few other thoughts:

• We estimate that there are 200 businesses available for sale in Maine. 50%-65% are unsalable or distressed businesses.
• This is a 5 year low. However, the number is expected to double over the next 10-20 years as baby boomers retire and exit their businesses.
• We are closing deals at 90% of asking price and seller financing has dropped to an average of 18% of deal value.
• Strong buyer interest for: health care, recurring revenue models and B2B services.

New Hampshire

Maine Business Brokers is aggressively growing our New Hampshire presence. We are adding brokers and opening a second satellite office in the Manchester area.

• New Hampshire is still experiencing a steady decline in buyer interest for c-stores, convenience stores and small markets.
• Similar to Maine, NH businesses are selling on average of 90% of asking price.
• Strong buyer interest for: niche manufacturing, medical devices, e-commerce firms and professional service firms.

Looking forward

We expect the surge in business listings to shift the market bias from “Sellers” to “Buyers”. Sellers with near term exit strategies should have an advantage in both price and buyer quality, while longer term exit strategies may have a more difficult time to extract the full value from their business. Strong buyer demand, low cost of borrowing, growing economic confidence and lack of good opportunities makes this an excellent time to sell a business.

“Buyers make offers”. This is a competitive market for appealing, performing businesses. We’ve seen an increase in “multiple offers” and several recent incidences of buyers who didn’t make an offer soon enough causing them to lose out on an opportunity. If you are a motivated buyer we recommend:

1. Make an offer on a business that meets your search criteria! Good businesses don’t wait around for you.
2. If possible, move immediately to a P&S agreement to lock a deal in place.
3. Make sure your timing is right. If you can’t close within 90 days you might get outmaneuvered by another buyer.
4. Understand basic business valuation in order to make a fair offer that will be acceptable to a seller.
5. Avoid “paralysis through analysis”! Endless due diligence will turn off sellers and mark you as a “tire kicker”. A seller will be able to provide you basic information that will allow you to gauge your interest and generate a value. Once an offer is accepted than you can dive into full due diligence.
6. Focus your search. Being open to any business opportunities means you’ll need to wade through an endless parade of listings and data. Come up with a tight, defined list of search criteria and stick to it. If the right business becomes available you can then move quickly and with the assurance that it’s the right fit for you.
7. Prepare your team. Have an experienced lawyer and accountant that you can work with that understands your risk tolerance.