1. Buyers Are Actively Searching for Acquisitions
As the market begins to reopen after the effects of COVID-19 we have seen the world of Mergers & Acquisitions (M&A) take off. One of the reasons for this being that many transactions were suspended during the 2020/21 lockdowns and buyers were anxious about how COVID-19 would affect business results. Due diligence was disrupted, and buyers were unsure of how to complete a transaction without travel. Sellers were also wary about how COVID-19 would affect their immediate cash flow, daily operations, and business worth.
However, as we said goodbye to 2021, sellers and buyers alike became far more confident about the business environment and started jumping back into M&A. Sellers now have a unique opportunity in the sense that buyers have almost 12 months of transactions to catch up with.
Another opportunity for sellers that has come from the M&A COVID-19 pause is that private equity and strategic buyers have been able to accrue massive cash reserves and are now urgently seeking growth. This has led to an increased amount of corporate and investor capital looking for appealing assets.
As well as this, certain industry-based trends are inspiring acquisitions and higher prices for sellers.
These include:
• Freight and Logistics
• Industrial and Manufacturing – Abundant interest from family offices in “predictable” businesses
• IT Services – Substantial shift to Cloud and digital transformation
• Consumer – Massive interest in online or Amazon based consumer goods businesses
• People Services – Increased need for staff due to closed borders
• Engineering and Construction – Enormous Government spending on infrastructure internationally.
2. The Price of Sales are High in Many Sectors
With such a strong interest being shown in most sectors from all buying groups, sales prices are strong.
As an overview, prices have been shown to be higher than expected recently. For example, if a business is usually valued at 3 times EBITDA, it is likely to currently be valued at 4 times.
This can make a huge difference for someone looking for a large sale. There are, however, many elements that effect the valuation of each business. Nonetheless, the overall observation is that values for good businesses are currently largely up against the long-time average.
3. The Good Times Will Not Last Forever
Whilst buyers are currently flocking to a sector, they can run away even quicker. This means that NOW is the best time to sell.
We have seen many industries – such as IT, engineering, mining, and mining services, and various tech – thrive over the years. However, these booms remind us that a hot market for acquisitions can rapidly chill. There have been countless examples of business owners considering selling during these successful times but were unable to transact. These business owners have then had to devote the next few years to restructuring their company and working to merely restore what they had before the industry crash.
So, if you are considering a possible exit remember that it is always better to sell whilst things are going well, and maybe now is the time to explore your options.
Based in Sydney NSW, ABBA Group specialises in business sales from $1-50m. Their expert business sales agents have represented corporates and individuals in over $500 million worth of acquisitions, divestments, and mergers since 2016, and are currently representing transactions with a total combined excess of $800 million. In addition, ABBA Group have partnered with hundreds of domestic and global companies – and linked many overseas investors with lucrative local opportunities.
Are you ready to get started preparing your business for sale?
Contact Bruce Irvine at ABBA Group now at brucei@abbagroup.com.au, or call 0420 316 168 for a no-cost confidential discussion about your business.
