In a recent 2015 post, I noted that more mid-sized businesses in the Canadian market are turning to complementary acquisitions with fold-ins or add-ons that allow the buyer to add on the revenue of the acquisition without the costs the seller (and their smaller business) had.
As we enter the New Year with renewed resolve and resolutions, I've been asked to say more about these financial benefits. Think of them as goals for fiscal fitness!
Here are some 20 ways companies acquiring smaller firms reduce costs and gain operational efficiencies:
“Where Are All the Baby Boomer Sellers?” asks a new Axial Forum article by Robert Flynn.
Flynn notes that in the U.S., “business for sale listings (mostly Main Street and often with less than $500,000 annual revenues) on the major transaction sites, as well as the middle market business brokerage firm listings are down in almost every North East state we track compared to five ago.” Yet “the 2013-15 period was predicted to be the peak of the baby boomer selling boom.”
On the other hand, while we still have way more buyers than sellers in Canada, our market for buying or selling a business is heating up. And in that market, the older boomers are selling and the younger boomers are buying.
In early December, the Wall Street Journal proclaimed 2015 the biggest year ever in the U.S. for mergers and acquisitions.
At home, Canadian companies have been turning their attention to the domestic market with 66% of respondents in an October Ernst and Young Global Limited survey identifying the Canadian market as their primary focus for M&A. Some 57% were focused on cost reduction and operational efficiency—up from 31% one year prior—consistent with what our offices are seeing.
When real estate is owned by the business or business owner
You own a business. You or the business also own the real estate used by the business. You do not have to include this real estate when selling your business. Retaining or selling the real estate separate from the business has its advantages.
Often the business itself is sold and a lease then put in place at market rent. This reduces the amount of capital that a potential purchaser requires and creates a wider market for the business. The owner can then sell the building with the lease in place and the purchaser does not have to be someone who wants to run or own the business that it houses.
As a result, there is a larger group of prospective buyers and the building sells for a higher price than could have been realized if sold along with the business. The goal is to sell the business before selling the real estate, or if it is listed in combination with the business, at the same time.
You want to sell your business. Fast.
And also get the best price for it, of course!
Let’s start by what that really means.
While six to twelve months is the average time to sell a business, selling time varies by business size, type, and market. Based on that model, six months is quick!
Simply lowering the price will seldom cause the business to sell, although there are some buyers in the marketplace who will scoop up grossly undervalued businesses. But then you won’t get the best value from it.
For the most part, people won’t buy your business if they don’t like it– never mind the price. The search for the right ‘fit’ in a buyer is still one of the most critical parts of the process.
So—whether you plan to sell it yourself or engage a professional i.e. a certified business broker to assist you in selling—what is the process? And what can you do to keep the momentum at each stage?
Are you a business owner thinking about retiring or changing your career? Or maybe you’re at the other end of the spectrum, thinking about buying a small or medium-sized business.
I was recently interviewed on the subject of buying and selling a business by Norman Jack for CFRA Radio’s Experts on Call program.
The interview is divided into four segments that you can listen to or choose to read the transcript (below in this article), according to your preference.
Here’s what we covered:
- Why this is an exciting time for business owners who want to sell and retire or move on to other things in life AND for buyers.
- The process of selling the business
Save time and money by learning from an expert before you buy or sell a business in Canada. Over the many years I've been in business, I've been privileged to help hundreds achieve their dreams.
Greg Kells is President of Sunbelt Business Brokers, Inc., the Canadian offices of the world's largest and most successful network of business brokers.