The media is causing inordinate economic panic with headlines such as “Economy shrinks at fastest pace in 26 years,” It’s important to realize that recessions are actually a normal part of the business cycle and do have a valuable purpose in that they clear away weak companies and make room for dynamic post-recession will last another 12 months (more or less)!
Does this mean that business owners should “hunker down” and try to wait for better times to sell their businesses? It depends on your age, personal objectives, and the financial health of your business! If your company’s health is deteriorating, we suggest that you call us to discuss exit and/or recapitalization options.
Because the “hunker down” mentality is widely shared, there is currently a shortage of businesses on the market and there is a plethora of displaced executive and private equity group (PEG) buyers seeking deals at fair prices.
As an example, we are currently performing a search for a west coast based PEG that is able to fund 100% of their deals without debt but we can’t find sellers!
Selling multiples for smaller businesses (under $100 million) have not been significantly changed by the recession. Is it a better time to sell when you are one of a few companies competing for the attention of buyers; or, when you are competing with a large number of companies who have waited several years to sell? Wait and be one of many who have postponed selling. Engage the process now and be one of a few. Under which scenario would you expect to receive the highest price?
Also remember, when the Bush tax cuts expire in December of 2010, capital gains rates will increase from 15% to 20% requiring that you sell your business for ~6% more to break even. Are you willing to keep your business for 10 more years until the political agenda (tax policy) changes?
Call us and allow us to help you determine your options.
Anthony (Tony) Vincent, President
Alpha Omega Capital Partners