Market Summary: Winter 2016

January 05, 2016 by brian

2015: A year in review. The past year was a record year for Maine Business Brokers. Attractive opportunities, fair valuations, low borrowing costs and reasonable seller terms helped drive us to a 68% sell rate—double the industry norm. We added 2 new brokers and expanded operations throughout New Hampshire.

Before discussing our projections for 2016, it might be helpful to look at the past year’s trends:

• Time to Contract. Businesses are going under contract much faster. A large, qualified buyer pool and lower inventory has driven “time to contract” to 10 year record lows. 40% of our listings sold were under contract within 90 days.
• Low Inventory. While the baby-boomer sell-off is still expected, we are seeing a significant decrease in sellers. Our analysis indicates that business owners are reaping the benefits of the surging economy or recapturing “lost ground” from the financial crash of 2008 rather than retiring.
• Industry Obsolescence. Changes in technology, distribution models and consumer preferences are quickly making many “Main St.” businesses unsalable.
• Change in Buyer Types. The last 18 months has seen a shift from financial buyers and individual buyers to synergistic/industry acquirers. With historic low borrowing costs, many mid-size+ businesses are realizing faster growth through mergers and acquisitions.

2016: A look ahead. Despite the normal hysteria of a national election cycle we expect the economy to continue to grow through 2016. We don’t anticipate further interest rate increases or any significant changes to the tax code.

We continue to encourage sellers who plan on an exit strategy within the next 5 years to begin planning now. If their business is on an upward trend, profitable and in a stable market position now may be the time to get a better sense of business valuation. Despite faster selling times, we still caution that selling a business can take 12-18 months to a successful closing. The economy will cycle down in the future and trying to “time the market” could result in losing sale value or working through another downturn.

If you are thinking of buying: be prepared. We’ve had several situations of either multiple offers or buyers losing a deal because they couldn’t move fast enough. Have clear and concise acquisition criteria; understand your financial wherewithal; have your legal/accounting team or advisors in place and be ready to move quickly when you find the right business.

If you are just starting the process of buying or selling give us a call. We are happy to sit down for a consultation and answer any questions you may have.