Australian Private Business Values December Qtr 2011–BizExchange Index latest results - Succession Plus

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Australian Private Business Values December Qtr 2011–BizExchange Index latest results

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Australian Private Business Values December Qtr 2011–BizExchange Index latest results

By , March 4, 2012

The latest results from the quarterly index update are really nothing surprising but do highlight some significant trends for business owners:

The past year has seen a large rise in the number of businesses the sale particularly the number of smaller micro businesses. This may signal the arrival of the major wave of businesses for sale as a result of the baby boom business owners now moving into retirement (many put their plans on hold during the GFC).
The premium paid for larger businesses, particularly those in the mid-market ($5-$15 million turnover) has also softened. This sector is strongly influenced by equity markets with mergers and acquisitions the primary source of potential buyers. the drop in value of smaller businesses is directly linked to the growth in the number of low-end businesses on the market.
The volume of business owners considering putting their businesses up for sale is expected to continue to increase because even recent levels are well below the average volume required to transfer ownership from the baby boomers to the next generation as they move towards retirement. On the other hand if these prices continue them for some owners selling a business in this market ( for these prices) is simply not worth the effort.
An increasingly large number of businesses are now selling for less than one year’s earnings. Many may find it more financially rewarding to recruit a gen Y or gen X partner and invest in the development with a view to a more gradual transition of responsibility and ownership. Others simply continuing to work for as long as they can then walking away.
Listed Australian businesses will continue to have the opportunity to profitably finance their expansion by acquiring privately owned businesses at lower P/E ratios than they currently enjoy themselves – it is this practice which should underpin the value of larger privately owned businesses that have been well-prepared.

Craig West

Craig West

Managing Director | Succession Plus

Craig West is a strategic accountant who has over 20 years’ experience advising business owners. His background as a CPA in public practice, provided invaluable experience in the key issues of concern to business owners. Following 6 years of study to gain two masters degrees, Craig focused on Capital Gains Tax (CGT) for business sales advising on strategic management of tax issues. This experience formed a very strong view that business owners (and often their advisers) were unprepared and unaware of the steps required to prepare a business for exit.

Craig now acts as a strategic mentor for mid-market business owners and has written four critically acclaimed books on employee incentives, succession planning, asset protection and exit strategies. Craig has conducted numerous seminars and keynote presentations throughout Australia & internationally, including adviser education programs for the Institute of Chartered Accountants and CPA Australia.