InSight

Exit and Growth Strategies for Middle Market Businesses

5 Reasons the Timing is Right to Sell Your Business Now | Part 2

By Brian Ballo | Apr 07, 2014

Time to sell your businessThis blog post is the second in a series of 5.

Business owners inquiring whether the timing is optimal for obtaining the highest price for their business, often start by inquiring: “What are business valuations in the market today?” EBITDA multiples provide a quick thumbnail answer to this question.

However, just focusing on today’s industry numbers, does not enable a business owner to evaluate the risk of whether the business will be worth more or less in the future, as compared to selling the business now.

Savvy business owners, who are attuned  to macro factors impacting business valuations, such as the aging population, financing terms and tax reasons, understand  that several conditions  exist today, which support selling your business in 2014.   In addition to  these  macro factors, the  question  of timing comes down to whether selling the business is strategically beneficial for the business, given its life-stage, as well as compelling personal reasons why it makes good sense for the business owner to sell.

2.  Pressure to Invest Available Capital Before Interest Rates Rise

After years of inaction, optimism in the U.S. M&A market is beginning to grow. One of the key drivers for this optimism is the  sheer amount of money sitting  on  corporate  balance sheets, and an increasing desire to put that money to work.

Also, for prospective Buyers needing to borrow funds to make an acquisition, a concern exists that if a loan is not obtained while interest rates are still historically low, then the inevitable rise in rates will make borrowing later, unaffordable. Once  both  cash and borrowing Buyers become active in the M&A market, that activity is likely to act as the catalyst which forces more competitors to also act.

The amount  of low cost capital that is available, and the momentum  of a rising M&A  market, is good news for owners desiring to sell, since these factors should combine to yield a higher purchase price.

Comparatively, the public markets have enjoyed good performance over the past two years, however, as a result of the 2009 Crash, many investors are still distrustful of investing in the stock market, and savings and money markets are producing paltry returns.  With borrowing rates so cheap, and with the current options limited for making money elsewhere, the prospects for investing in profitable companies, bodes well.

Posted by Brian Ballo.

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