The market for businesses is red hot, and that fact is translating over to lots of activity in businesses being sold. However, it is possible that this record-breaking number of sales could cool down in the near future. In a recent article in Inc. entitled, “The Hot Market for Businesses is Likely to Cool, According to This New Survey,” the idea that the market for selling businesses is cooling down is explored in depth. Rather dramatically, the article’s sub-header states, “Entrepreneurs who are considering selling their companies say they’re worried about the future of the economy.”
The survey conducted in January 2019 by Pepperdine University’s Graziadio School of Business, as well as the International Business Brokers Association and the M&A Source, interviewed 319 business brokers and merger and acquisitions advisers. The results were not rosy.
Slow-down in Business Market Expected
A whopping 83% of survey participants believe the strong M&A market will come to end in just two years. Perhaps more jarring is the fact that almost one-third of participants expect the market will cool down before the end of 2019.
Survey participants believe that the economy will begin to slow down, and this change will negatively impact businesses. As the economy slows down, businesses, in turn, will see a drop in their profits. This, of course, will serve to make them more challenging to sell.
Business Owners Consider “Getting Out”
The Inc. article quotes Laura Ward, a managing partner at M&A advisory firm Kingsbridge Capital Partners. “People are thinking about getting out before the next recession,” says Ward. The Pepperdine survey noted that a full 80% of people who own companies priced in the $1 million to $2 million range are ready to retire. In sharp contrast, 42% of companies priced in the $500,000 to $1 million range are heading into retirement. Clearly, retirement remains a major reason why businesses are being sold.
Is now the time to sell your business? For many, the answer is a clear “yes.” If the economy as a whole begins to slow down, then it is only logical to conclude that selling a business could become tougher as well.
The experts seem to agree that whether it is in one year or perhaps two, there will be a shift in the number of businesses being sold. Now may very well be the right time for you to jump into the market and sell. The best way of making this conclusion is to work with a proven and experienced merger and acquisition advisor. Your M&A advisor will help you analyze the various factors involved and make the best decision.