2018 looks to be a great year to consider a private company sale. A record-high stock market, trillions in acquisition capital, continued favorable interest rates and shifting demographics create favorable opportunities for profitable, lower-middle market business owners to pull the trigger and take their companies to a global market of buyers.
Preparation Meets Opportunity: Business owners who have spent the last few years preparing their companies for sale will enter a strong sellers’ market in 2018. Being prepared for a sale and having the right M&A advisor to guide the sales process will result in increased competition and favorable sale terms.
Favorable tailwinds include:
- High Stock Prices: Global stock markets have ended 2017 on record highs, gaining $9tn (£6.7tn) in value over the year due to a strong worldwide economy,
- Growing Dry Powder: The amount of dry powder — money raised but not yet invested by investment funds— will exceed $1 trillion by the end of year in private equity alone, after reaching $963 billion in July, according to researcher Preqin Ltd. That’s pushing out the average time it takes for new commitments to start being invested to as long as three years, up from one year previously, according to State Street.
- It’s a Seller’s Market: Depending upon the businesses category, the market might be very favorable for selling, giving business owners the opportunity to get the most for their companies. The excess capital that has accumulated inside one’s company can be used to pursue different opportunities, or to simply diversify a business owners retirement income. Remember that 2018 won’t last forever.
For those business owners who aren’t already prepared to enter the market this winter, now is still the time to start the process and prepare for a or end of summer market entry with a goal to sell their companies before the end of 2019 as summertime is often a slow period for M&A closings.
Selecting and partnering with the right M&A advisor, creating effective marketing materials along with the identification of global strategic and financial buyers for a business can take months. With the average business sale taking between 7-18 months to close, timing a sale with generally favorable market conditions in 2018 reduces the risk to the business owners and increases the odds of a favorable outcome in 2018.