Generally, the market for selling any business that has a consistent or improving trend in sales and cash flow is pretty good year in and year out. There always seem to be more qualified buyers, who are eager to find just the right business, than there are good quality businesses for sale, and this trend shows no signs of abating. With the growth of private equity firms, who seem to have an unlimited supply of equity capital to invest in medium- to large-size businesses, demand will likely continue to outpace supply for the foreseeable future.
With the continued aging of the U.S. population, the Baby Boomer generation is just now approaching retirement age, which means that more businesses will likely be available for sale, but it also means that more experienced executives with some severance, savings, and/or retirement plans will be looking to relocate from the northern states with their cold, cold winters, and retire or semi-retire to Florida and other warmer, southern states. Many will want to acquire a business as a way to stay active and increase their net worth before fully retiring.
Acquiring a business of sufficient size is also one of the last remaining avenues to secure a permanent visa if you’re trying to relocate to the U.S. from another country, and this has helped keep the market for businesses strong.
The market for selling your business does tend to follow the overall health of the U.S. economy to some degree, and higher interest rates have a chilling effect on the market. Some deals that make great sense at 7% – 8% interest, simply won’t fly at 12%,
In spite of all the news about the continuing credit crunch, 2008 should continue to be an excellent year for business sales as interest rates continue to be at near record lows, and the Fed has indicated that it’s prepared to keep lowering rates as needed to avoid a recession. One final factor that should make 2008 a good year for selling your business is the very low capital gains tax rate. Many political pundits believe that we’re very likely to see a Democratic President sworn into office in January, and all of the Democratic front runners have pledged to repeal the tax cuts that have been enjoyed by “the rich, business owners” in recent years.
If you know of a business owner who’s thinking of selling or buying a business and who might benefit from a complimentary consultation with us, have them contact me, or any of the M&A professionals at www.bradwaygroup.com
By: Mike Ertel, Transworld M&A Advisors