Mergers & Acquisitions
Displaced Execs Feling Deals for Small Businesses
Business First of Columbus - by Robert Celaschi For Business First
The market for buying and selling businesses is heating up.
The number of closed transactions reported to BizBuySell.com nationwide jumped in the second quarter. The San Francisco-based online marketplace for businesses tallied 1,106 transactions, up from 1,040. To put the numbers in perspective, the volume is about half what it had been in 2008, said BizBuySell, an Internet marketplace that has 700,000 visitors looking for business opportunities each month.
The market has buyers, especially for smaller businesses.
“In the last two or three years, there are corporate executives displaced, underemployed and unemployed. They are wanting to take control of their destiny through business ownership,” said Emmet Apolinario, president of Columbus
Clay Baker is one such buyer. An executive in mortgage banking for 16 years, his career took a turn along with the mortgage industry in 2007. He had savings, but not enough to retire. Besides, he said, mortgage banking didn’t look very good on a resume at that time.
“I recognized the only path to get back to the income level I was accustomed to was to own a business,” Baker said.
He did his research, and worked with Apolinario to buy a Fastsigns franchise.
Making signs and banners didn’t interest Baker that much, but he saw an opportunity.
“The previous owner was ... not that actively involved,” Baker said. ”I figured with a little sales and marketing, there should be an opportunity to grow this business.”
In the first nine months, revenue grew about 25 percent, he said. Then the recession hit, and revenue dipped a few percent in 2009. This year it is holding steady.
With revenue on a plateau, he’s considering whether to buy a second business.
“I think there could be opportunities, and I might be mitigating some risk factors by acquiring something completely different than the sign business,” he said.
Which brings up one of the factors putting the brakes on deals.
“We are running into buyers who want to buy, but we have trepidation from the banks,” Apolinario said.
Baker can testify to that. When he applied for financing in the spring of 2008, he got approval within 30 days, he said.
"Had I gone about this in October of 2008, I wouldn’t have been able to get financing. That’s how much things changed in six months,” he said.
Smaller deals are easier to finance, according to BizBuySell. But bigger deals still get done, said Frank Wisehart, business advisory services director for Schneider Downs & Co. Inc. in Columbus
The most active market comes from companies with revenue between $10 million and $100 million. He said banks have cleaned up bad loans and are able to put up more money this year, he said.
The other challenge is dismal performance. Because of the way business valuations are calculated, a company that had a lousy 2009 would fetch a lower selling price this year. On the other hand, sellers are looking at higher capital gains taxes if they wait until 2011, Apolinario said.
Wisehart said companies that have downsized have returned to profitability and are seeing more sales.
“Manufacturing and technology seem to be improving,” he said. “Nearly everyone agrees the market will turn positive. The question is when that occurs or what event triggers the tipping point. ... I think economic prognosticators were caught flat-footed by the recession, and no one wants to wrongly predict an extended positive growth period.”
Robert Celaschi is a freelance writer.
No comments:
Post a Comment