When to sell a company is one of the toughest questions a business owner faces and timing can mean a difference of millions of dollars in take-home pay. 2018 was a great year to sell a business, as valuations were high and buyers were awash in cash. 2019 is shaping up to be even better.
Here are the top three reasons owners should consider selling their business in the next twelve months:
We’re 10 years into an economic expansion and markets are near all-time highs. In addition, private equity firms and other financial buyers are flush with cash. According to Pitchbook, the total deal value of PE deals has increased from $143B to over $500B from 2009 to 2018.
In addition, 2016 and 2017 were record years for private equity fundraising and firms are still looking to deploy that capital into investments. This combination of the multi-year bull market and large amounts of capital waiting to be deployed has resulted in an increase of the average PE buyout multiple from 6.9x EBITDA in 2009 to 11.9x in 2018.
In the last few years, many different types of acquirers have entered the market, giving a wide range of options to owners looking to sell their business. In addition to the thousands of private equity firms looking to purchase companies, family offices, individual sponsors, search funds, and strategic buyers have all increased their efforts.
In addition, many strategic buyers and private equity firms now have direct outreach efforts, where they bypass the banker or broker and go directly to the business owner. This not only cuts down on cost, but also cuts down the work a business owner has to do to find the right partners.
Furthermore, companies like Quiddity allow business owners to bypass hiring a broker and, instead, get directly introduced to potential buyers without having to pay a fee. Traditional brokers still exist but it has never been easier to save the hundreds of thousands of dollars in fees and go directly to the potential buyer.
Unlike the private equity firms of old, today’s acquirers are buying businesses with a growth mentality. They figured out that taking over a business and growing it into a larger business is more lucrative than taking over a business and selling it for parts.
This has the added advantage that buyers look after the employees that stay with the company, protect the legacy of the founding team, and continue to provide quality products to customers. In addition, they are much more willing to listen to what has been working for management and include the founders in management decisions going forward.
If a business owner cares about their legacy with employees and the culture of the company they are leaving behind, it’s now easier than ever to find values-driven acquirers whose interests align with their own.