Is the post pandemic era the right time to sell a business?
The post pandemic era may not necessarily be the right time to sell your business, but is certainly the right time to ensure your business is ready to sell in the future. During COVID-19, we have already seen many business owners who are badly caught out, unprepared and without any substantial reserves in place. Lack of business continuity planning and resilience around systems, communications, IT etc. meant many businesses were simply unable to operate when businesses went into lockdown at the start of the outbreak. Whilst many have since recovered, the financial implications are only just beginning to be realised.
“It is only when the tide goes out that you see who has been swimming naked”
– Warren Buffett.
Disaster preparation, in this case, a severe virus pandemic, is always easy in hindsight and I am very confident many businesses are now reviewing their business continuity plans to ensure they can cope much better in the future. Preparation for the sale of your business should also be a priority. The academic data shows business owners who have prepared well in advance of the time they wish to exit will not only achieve a better sales outcome but also are more likely to successfully exit.
After any significant downturn event, there are always opportunistic buyers in the marketplace and often they are only looking for fire-sale bargain-basement acquisitions – this is not a great option for most business owners. But in many ways, these types of events can cause us to consider a restructure of the way that we operate our business and this may lead to an opportunity to merge or even acquire another business as part of our longer-term exit strategy.
Valuations are typically reduced, funding is more difficult if not impossible to find and the uncertainty in the economy and business market going forward will discourage most buyers. But this is a time of great opportunity and for those who hold cash reserves or funding, a larger number of opportunities to buy quality assets at a discount than normal will be available over the next 12 to 18 months.
The trick to taking advantage of these opportunities is to be well prepared, have a defined acquisition profile (in other words know exactly what you are looking for) and be ready to move through the assessment due diligence and negotiation phases quickly.