Can you still sell your business during Corona as international stock markets shake to their foundations? Not only investors are watching stock prices with concern. The current economic climate also seems to be bad news for entrepreneurs considering selling their businesses. The coronavirus plays a big role in this, but the price of oil and impending recession also have an impact.
Uncertainty negatively affects selling the business
To sell your company during Corona, it is important that the company shows stable and -even better- increasing operating results over a longer period of time. The selling price is determined primarily by the outlook for profitability. These have become uncertain for many companies due to the current Corona crisis. As a business owner, what can you do to sell your business and not let the value of the company evaporate?
Dual Sourcing ensure risk diversification
Many of our clients have an acute problem with their sourcing. Production of parts or finished goods in factories in Asia is faltering or has come to a complete halt. Where possible, these companies are now diverting to the edges of Europe for sourcing. For example, clothing production in Turkey or electrical equipment in Romania. This movement, we believe, is structural. Even now that production in China has gradually started up again, many companies are choosing to spread their sourcing more. Part of their sourcing is permanently spread over several continents. From a merger and acquisition perspective, dual sourcing is also a good idea. Spreading across multiple suppliers and geographies leads to lower risk for the company as a whole. Lower risk means more interest in the company and possibly a higher selling price.
Change in business model
Some companies are hit extra hard by the virus. Consider airlines, logistics service providers, the hospitality industry, or, for example, parties that organize trade fairs, conferences or events, educational institutions, etc.. For all these entrepreneurs, the question is: is there a way to shape my service in a different way. This is certainly not always possible. We also see very creative entrepreneurs: courses are given in an online environment instead of physically on location. This is especially interesting now for employees who cannot or should not come to the office. Logistics service providers are aiming for a shift in turnover from actual transport to storage. And a hard-hit sector like the hospitality industry may well create opportunities in additional home delivery, precisely when people want to leave their homes as little as possible. So entrepreneurs are challenged to look at their business model with new eyes.
Flexibility in workforce
Many companies are asking employees who are flu-prone or otherwise at risk to work from home. Again, not easy for all sectors, but in business services, for example, we see a great willingness both on the part of employees and employers to come up with workable and flexible solutions.
Private Equity continues to buy
The sharp fall in equity prices is likely to lead to a further decline in interest rates. This means further pressure on the assets of institutional investors such as pension funds. Alternative asset classes such as private equity therefore remain very interesting for them. As an entrepreneur who wants to sell the company, this is good news: private equity will also be looking for great companies to invest money in in the coming period.
Strong entrepreneurs and companies are emerging now
With an entrepreneurial view of the market, Corona can offer you opportunities in addition to risks. Shifts in the business model being made now lead to a more balanced company with more diversified sourcing, alternative outlets or more flexibility in staffing. If the company is able to sufficiently monitor profitability in these times then it has proven to be an attractive party for buyers, for example from private equity. So even now may be the right time to sell your company during Corona.
Would you like to have a non-binding discussion with us about the saleability of your company in these market conditions or what you can do to prepare your company for sale?
Then call Clifton Finance: Gonneke van der Lee +31 6 52466518 or Maarten Vijverberg +31 6 55853074.