Market Report Summer 2014

June 06, 2014 by brian

Summer is upon us and while deal flow slows dramatically in July, buyers and sellers often “tee-up” for activity in the early fall. For this reason, late spring, early summer is a good time to list a business or to identify a business acquisition for a 3Q closing. We remain optimistic that the improving economy, falling unemployment and market indicators will continue through 2014. Most businesses we are reviewing have stable or growing earnings, and consistent profitability. “Growth through acquisition” may be the most cost effective strategy to grow your main-street or mid-market business. An acquisition can buy you market share, eliminate a competitor and reduce risk at a cost less than a start-up or new entrant.

Overview/comments:

1. Businesses with low price/cash flow ratios are attracting the most buyer activity.
2. Buyers are still unwilling to pay or accept “pro-forma” financials and are deriving values on 2-3 historic earnings.
3. Individual buyers still think it’s a buyers market and are making unrealistic “low ball” offers and missing out on great opportunities.
4. Corporate acquirers are offering significant cash at close plus an earn-out or secured financing.
5. Strong businesses are in multiple offer scenarios.
6. Sellers are listing at fair and realistic values.
7. At least 50% of deals are cash deals without third party financing.

 

Maine

Maine continues to see a dearth of business listings. The business model obsolescence of c-stores, neighborhood markets and seasonal tourist restaurants has pushed buyers into unfamiliar territory. Professional service firms, niche “Maine Brand” businesses and dominant industrial players are generating strong buyer interest. Businesses located in mid-coast and southern Maine represent at least 80% of buyer activity.

 

New Hampshire

Sales activity in NH continues to increase. It’s expected that a surge of medium sized manufacturers will be available over the next 10 years as owners begin a transition to retirement. NH’s tax climate, quality of life and proximity to larger NE markets makes these businesses appealing to out of state buyers. Like Maine, NH is seeing a decline in “mom & pop” tourist related businesses. Branded hospitality chains have penetrated smaller, niche markets as consumers demand a more consistent vacation experience. This market transformation may force sellers with real estate to evaluate whether the highest and best use of property is the current business. New Hampshire has a small but robust niche manufacturing base that is appealing to strategic buyers.