A question I am often asked as a merger and acquisition advisor is about the right time to sell a business. My answer is always that the best time can only be determined in retrospect. There are many examples where the timing was just right. With a business that is performing well, it is easy to decide what the best time is when there is a desire to sell. After a string of good years, the time seems to be right.
But then what is the right time when there is a down market or sudden increased competition? That answer is a bit trickier to give, and unfortunately we see that situation more and more often with our clients. When things get bad, it is important to first put the company in order and restore profitability. But how long to wait for recovery? Sometimes profitability never returns to its former level.
In our experience, at those times it is good to look more broadly than just at the company’s financial performance. I am thinking of market developments, competitive position, market share, financial position, opportunities and threats, in short, more the strategic aspects. And this in turn requires the necessary insights, especially in this day and age. The size of companies is also becoming increasingly important, so joining the bigger brother or a wealthy investor is an important consideration.
But if all this is not a discussion, the company is performing well and you have to decide, if 2015 a good time to sell your company.
Is 2015 a good time to sell your company?As far as I am concerned, there are plenty of reasons to sell now. I will mention the most important ones:
Lots of investors, lots of money
There is a lot of money available from investment funds. And are too few candidates for the huge amount available for investment. Even the larger companies have an ample war chest and are looking for growth and investment opportunities.
Rising market
It is always better to sell in an up economy than a down economy. Business value is determined by future earning power. The outlook for the manufacturing industry for 2015 is positive. Those markets for which this does not hold true often face structural problems such as the retail market.
Multiples in transactions improve in 2015
Economically, the recovery is still fragile but sentiments are good in the stock market and in investment land. This is reflected in the higher calculation factors which are improving like last year. Multiples are rising especially with low interest rates.
New business models are coming
In today’s economy there are many changes coming such as digitalization, new forms of distribution and new business models due to greater transparency and internationalization. Perhaps it is better to get ahead of this because clout in all these new developments is becoming increasingly important.
If in doubt, contact us for a broad view, maybe 2015 is the best year for you to sell your business.