While understandably it can be easy to turn negative during trying times like these, we wanted to make sure you were aware of some reasons to be optimistic regarding the business-for-sale market.
Are Buyers Active?
Yes! Buyers are very active and we expect to entertain near-record inquiries in the coming months. During the first half of March 2020, we had 649 buyers inquiring actively on current listings. Generally, disruptions of this scale end up producing a wave of new entrepreneurs that are interested in taking control of their destiny. How do we know this to be true? Record levels of buyers came out of the 2008-2010 Recession.
Additionally, private equity and family office buyers have mandates to acquire companies.
As proof that deals are getting done, Small Business Deal Advisors, successfully sold two businesses in March 2020 including a restaurant.
Has The Government Helped?
Yes, the government has responded extremely fast relative to 2008-2010. The CARES Act does a couple of powerful things:
Incredibly, Section 1112 mandates the SBA to pay the entirety of 6 months of interest, fees, and principal on all new 7a loans generated until September 27, 2020. We have never seen anything like this!
It was not until the Fall of 2009, nearly a year after the market crash, that the SBA relaxed goodwill limits for business sales. The 2020 response has been much faster and broader!
The CARES Act also features an employee retention credit, an increase in the use of net operating losses (NOLs), an increase in the amount of interest paid that can be deducted and an acceleration in depreciation for Qualified Improvement Property (QIPs). All of these items have the potential to positively affect M&A transactions. You can read more detail about these items here.
So, If I Am A Seller, What Should I Do?
While we do not wish to gloss over challenges that may be faced, for owners that desire to sell due to burnout/fatigue, health or energy-loss, there is definitely a market for businesses and we fully expect to field inquiries from record numbers of buyers over the next 6 months.
Additionally, the government/SBA is being even more responsive than we would have expected. This causes us to be optimistic about the future.
Please contact us if you would like to confidentially discuss the prospective sale of your business.