If you’re thinking about selling your business, now could be a great time to pull the trigger. We’re still in the midst of a strong seller's market, but the tide may turn in the near future.
The current landscape
The market has been in an upcycle for some time now. These cycles typically last six to eight years, and we’re in year eight. So, the tide will most likely turn sooner rather than later. Just exactly when, though, is anyone’s guess.
Right now, interest rates remain lower than historical levels. And if President Trump gets his tax plan, capital gains tax rates may drop as well. However, many people in the mergers and acquisitions (M&A) world think a buyers’ market is coming.
We’re seeing higher valuations, especially in bigger companies. Many analysts think these valuations are at or are close to peak levels. So, sellers may rush to take advantage before prices drop. This could be a boon to the buyers who are desperate for businesses to buy right now, but may eventually signal the end of the sellers’ market.
What buyers are facing
Many buyers are currently sitting on the sidelines – they just aren’t finding great companies. And the businesses that are out there often get caught up in pricy bidding wars. The good news is that the funding is there to back up these negotiations.
There’s a lot of money on the sidelines, and a lot of money chasing. Banks are more than willing to lend – in many cases, they are hungry to lend to buyers. From that standpoint, a business can get financed fairly easily. The trick is for buyers to bring more than capital to the table.
In this competitive market, buyers who provide added value in a sale have the competitive edge. That can mean having someone who can seamlessly step in to run the business, or a knowledgeable partner to sit on the board and provide instant value. Industry expertise and plans for expansion and further acquisitions can be differentiators, too.
Opportunities for sellers
When there are so few businesses up for grabs, any seller is bound to feel like the belle of the ball as many buyers come courting. But no matter the market, the best time to sell a business is when the business is ready.
It’s tempting to take advantage of the current sellers’ market, and many owners are proactively testing the waters. Some of these owners are reminded of the market downturn of 2007 and don’t want to weather another market correction. Others are refinancing while conditions are still favorable. If nothing else, it’s a good time for owners to evaluate where they are and the obligations and opportunities they have.
An optimistic outlook
We don’t know how long it’s going to last, but we are definitely still in a sellers’ market. And we feel positive about the opportunities at hand now and those we’ll see in the future.
Are you curious about the opportunities for your business, and wondering if it’s a good time to sell? O’Keeffe & O’Malley is happy to answer your questions and explore your options with you. Give us a call at 913.648.0185 for a confidential meeting.