There is an old saying that “timing is everything“. That is especially true in the investment world. Be it the stock market or buying a business, timing can be critical to the rate of return on investment or even the survival of the investment. Although there are many people far more qualified than me to address the timing in the stock market, I will address the timing of business acquisitions in the current market.
Business Acquisitions in the Current Market
In addition to what my team is experiencing at the FBB Group, conversations that I have with business intermediaries across the country indicate that the demand for businesses continues to exceed supply. In our opinion this is primarily due to the reduced number of businesses on the market due to COVID-19 business closures and reductions in sales. As an example, I had a luncheon meeting the other day with a decades long entrepreneur that commented that his business went from $80,000 per month in sales pre-COVID-19, to $20,000 per month in sales, during COVID-19. Although the business survived, it is obvious that the business is probably worth less due to the reduced sales, and unless compelled to sell due to other reasons, ownership would probably defer going to market until sales and profits rebounded.
How Transactions are Being Affected
The foregoing notwithstanding, activity is still robust, and we are seeing the time it takes to complete a transaction getting longer, particularly with loan underwriting. Not only are underwriting decisions more complex due to COVID-19 business interruption issues, but layoffs during the shutdown and the consolidation within the banking industry has reduced overall underwriting capacity. The bottom line is that if you are planning on buying a business, you should not be surprised to find competition from other acquirors and plan for a longer processing time to close the transaction, unless you have existing financing in place.
Benefits from Federal & Colorado Infrastructure Plans
Speaking about “timing being everything“, one of our featured businesses is a traffic control company with the majority shareholder retiring. Not only is the business well-positioned and very profitable, but it is likely to be a beneficiary of both the Federal Infrastructure plan working through Congress, and the Colorado Infrastructure plan that is even farther along in the legislative process.
Consider FBB Group for your Business Acquisitions
The majority of our business is derived from referrals. Please consider referring our services if you encounter a situation involving the potential purchase or sale of a business.
Ronald V. Chernak
Inspiring business relationships since 1982!