Selling your business in 2012: a positive future

Making economic forecasts is no more accurate than picking a winner at the Superbowl

After a torrid year, what are the prospects for the economy in 2012 – and what are the implications for anyone planning to sell a business? 

Sellers will sometimes put a sale on the backburner if they think the market has reached its nadir and a recovery is round the corner.

Conversely, if they think the economy will drag along the bottom for a while yet then they won’t delay – unless of course these sellers are happy to wait a few more years.

The Eurozone

An enduring resolution to the Eurozone debt crisis seems a long way away, with the Germans and French irreconcilable on the fundamental point of guaranteeing the debts of the stricken PIIGS (Portugal, Ireland, Italy, Greece, Spain) nations.

And many commentators are saying it’s a case of when, not if, the euro collapses. If the single currency collapses in a disorderly fashion then the prospects for the global economy are bleak indeed. 

Furthermore, financial retrenchment across the developed world is putting the brakes on even China’s previously runaway growth.

Optimism and oil

And yet, there are reasons to be optimistic. 

Writing in the Telegraph, Jeremy Warner describes the economic data as “relatively positive” given the monetary consolidation occurring in the Western World.

The problems across the Atlantic continue to dominate the business news and every fresh bailout seems to buy only time

The US recovery is showing signs of gathering pace, albeit with cutbacks in Federal spending taking effect later in the year.

Warner also suggests that oil prices, a factor without match for its importance for the global economy, could fall as production picks up in Libya and Iraq.

That said, if Iran carries out its threat to close down the Strait of Hormuz, through which 20% of global oil supplies pass, the 2008 oil spike that foretold the financial crash will look like a mere appetiser.

But if there’s one prediction you can make with 100% certainty of success, then it is that few so-called experts will get their predictions right – and many will be wildly off-beam (not that it deters many from making a fresh round of predictions again a year later).

So planning your exit based on either an anticipated recovery or deepening recession is about as scientific as picking a winner from two closely-matched teams at the Superbowl. 

Brokers see positivity

Various economic indicators will influence the calculations of some sellers more than others, depending on their business.

For obvious reasons recession-proof businesses, such as food-based businesses, convenience stores and pawnshops will be less concerned by how far down the track of recovery we are. 

And we’ve spoken to brokers who suggest that quality businesses with good track records will still find no shortage of willing buyers. 

“A quality property will still sell,” insists Michael Taylor, director of Everett Masson & Furby (EM&F), albeit with the caveat that the business must be “priced realistically." 

Our latest quarterly survey revealed that a majority of sellers are receiving as much, or more, interest in their business than they expected. Twenty-one percent of buyers have received the level of interest they expected while a further 21% have received more interest than they had anticipated.

This corroborates what brokers have told us: that there are still plenty of buyers in the marketplace. However, there’s still a lack of finance, so many are cash buyers on the hunt for bargains.

Concerted action taken by the European Central Bank have thus far avoided another Credit Crunch, although 30% of buyers who’ve tried to raise finance say they’ve encountered difficulties raising finance, while 26% have found it very difficult to get funding.

“It’s definitely a buyers’ market,” says Taylor, “especially if they have cash in their pocket. Some people are under pressure to get out, so if you dangle that carrot to give an escape route then people will take it.”

Unless you own a business that is still thriving amid these difficult trading conditions, and it easily demonstrable potential, you’re well advised to exercise flexibility with your asking price. 

Eighty-three percent of buyers have encountered what they deem to be overpriced businesses and sellers who are inflexible with their asking price. 

Those cash buyers are on the market to capitalise on the scarcity of credit and to buy a bargain.