I’m thinking of selling my company. Is now a good time?
Selling your company is an enormous decision. Besides all the work that has to be done to prepare the company for sale (the topic of a future blog), there are times in the economic cycle that are better than others for a sale.
Just like the business cycle, the M&A (merger and acquisition) markets also function in cycles.
In my opinion, now is NOT a great time to sell. Here’s why…
• The M&A market has been hot for almost 10 years because there was so much cash available for acquisitions. Multiples have increased so high that acquisitions are not as profitable — it would take a long time to earn the returns desired for the risk.
• There is so much uncertainty in the economic markets that it is hard to project business growth. Again, achieving a profitable return is less certain if the future is less predictable.
• Finally, with the pandemic in 2020/2021 and then inflation in 2022, it’s hard to look at historic trends. These trends are used to build the projection models to predict future value.
Since the historic numbers for the past 3 years have to be manipulated to build a solid foundation for the projection model to forecast future profitability, buyer are being very conservative. Sellers are not able to command top dollar.
If possible, sit on the sideline. Improve your operations, increase your sales and beef up your management team so you are ready to sell when the economic markets improve. The money sitting on the sidelines will also be ready to spend on well-run companies.
Is this what you’re seeing in the market today? Please let me know your experiences. I would love to hear your feedback.
Want to talk further about this subject?
Contact me and book a time or consider joining a BOMBA Mastermind where you will get the tools to complete the sensitivity analysis on the margin compression and you can talk confidentially to a peer group who could give you constructive feedback on your pricing.