Deal activity - industry acquisitions
Increasing acquisition activity is a clear pointer to pause and seek professional advice so you don't miss the boat. M&A cycles come and go, and those high valuations you keep hearing about may not be available five years down the line.
Disruptive new entrants may threaten the status quo in your sector, and investors with deep pockets may be backing half your competitors. That doesn't mean your business will slip into terminal decline, but it suggests it's time to re-examine your main differentiators. If you aren't willing to invest in that journey, or you are unsure which way to turn next, this suggests the time is right for you to take advantage of the market, sell up and move on.
For example, Amazon has expanded beyond its core e-commerce offering to enter cloud computing, grocery retail, transport logistics, and online pharmacy prescriptions in recent years.
Also, don't forget that buyers have similar dilemmas when acquiring. Some have strict acquisition target criteria, while some are opportunists who make occasional forays. And some are forced to acquire to by competitor movements.
The big picture - economic cycle
Benign economic conditions make it easier to do business - including acquisitions. For instance, the ongoing low interest rates have made it easier for corporations to borrow more for acquisitions. Lower inflation and high business confidence (e.g. stock market performance) are also useful for increasing appetite for acquisitions.
Conversely, rising labour costs or exchange rate fluctuations may start diluting the profit margins your eventual exit will be valued on.
Right for you - personal circumstances
Your own reasons for wanting to sell tend to also help you build a timescale for your eventual exit. These can be sudden and unexpected - like a divorce or health diagnosis - or more fluid, such as a desire to relocate, other business interests or retirement.
More than 80% of BCMS clients are aged 40-70 when they sell, with an average age of 57. But not all of those are looking to retire, and a host of seemingly insignificant factors can have a bearing on deciding it is time to sell and exit.
Common personal reasons for selling a business include:
- Improve work/life balance
- Personal financial exposure to your business
- Family demands
- Health issues or burnout
- Serial entrepreneurs wanting to sell up and start anew
- Wealth portfolio review
- Stay flexible with your timescales. There are lots of twists and turns in negotiating a business sale
- It can take up to two years to prepare your business for sale, so build that into your plans
- Learn more about acquisitions in your industry, including buyer rationale, and price and terms where available. A professional business sale advisor can help bring you up to speed.
By Dave Rebbettes