Business are changing hands in Ohio, but at
lower prices than in the past.
RICK ADAMCZAK | Daily Reporter
It has been a pretty busy year for buying and selling businesses in Ohio, but many of those businesses are being bought at lower prices, according to local mergers and acquisitions experts.
“There were more, but the businesses were selling for lower prices, businesses were valued lower,” said Emmet Apolinario, president of the Ohio Business Brokers Association.
The heightened activity coming off a busy 2010, shows that investors are continuing to return to mergers and acquisitions.
That’s after a couple of quiet years when many investors lost money and had none left over to buy companies and those who did have cash or credit remained wary of the economy’s future.
Though the economic recovery has been sluggish, investors are now finding some good deals on businesses.
“Our membership is up and when I see that, that means there’s growth in activity,” said Apolinario. “People are out there thinking there are transactions to be had in this market.”
He said the year started out busy but then hit a lull in the summer as worries about a double-dip recession increased, but in the third quarter activity picked up again.
“Because of the summer drop, I’d say it’s been (as busy) as last year. Every month it seemed like there were closings.” Apolinario said. “It seems like the business community is just in limbo and I think they’re tired of this limbo.”
Health care-related companies remain a popular choice for investors, he said, “that’s still strong. There’s still strong demand for those companies and they have good valuation,” Apolinario said.
Distributorships also are having a strong year and are holding their value and light manufacturing, too has been relatively busy.
On the flip side, service-oriented companies are not holding their value as well, Apolinario said.
“Because of their good will aspect, they’re not holding their value. You have the tangibles and then the good will aspect and the good will is valued a lot less than it has in previous years,” he said. “If you’re in a services company I’d expect your valuation is going to be lower.”
With the new US Small Business Administration guidelines having gone into place this year, the face of financing deals could change and those changes could impact merger and acquisition activity into next year, Apolinario said.
“Before you could get in with 10 percent (cash down). That has changed to 20 to 25 percent for existing businesses and 30 to 35 percent for (new) businesses. I don’t know what that will mean for the landscape of buying,” he said. “The SBA standards have only been out for a month so we’re still getting a feel for it.”
One option is that sellers may have to take a greater role in financing the deal, perhaps providing a great portion of the loan to the buyer.
“It may be cash and then 5 to 20 percent from seller financing,” said Apolinario.
Another trend is greater interest in Ohio by foreign investors. He said a Chinese company has approached the brokers association about possible purchase options in the state.
The Ohio Business Brokers Association is a non-profit corporation founded in 1987. The group helps align prospective business buyers with businesses that are for sale.
Apolinario said membership in the association grew about 10 percent this year and renewal for next year is already at 87 percent.