Sellers of successful businesses are experiencing little difficulty finding serious buyers, despite the dearth of credit and a generally cautious market, according to leading business transfer agents.
“A quality property will sell,” says Michael Taylor, who oversees the sale of businesses in a range of sectors for Everett Masson & Furby (EM&F) Taylor.
There is, however, a caveat. “They must be priced realistically. The market is very price-sensitive, so if you are overpriced you have no chance of selling your business.”
He adds: “We’re also seeing buyers trying to gazunder, which is upsetting vendors.”
Sellers struggling to realise their asking price are advised by another leading business transfer agent to consider offering to fund the deal themselves. Known as vendor financing, accepting a portion of the consideration in deferred instalments can bridge the gap between what risk-averse banks are willing to fund and the asking price.
We get a lot of interest in online retailers, which can be operated from home or industrial parks rather than in the city centre where you’ve got big rent and rates
Michael Taylor, EM&F
Deferring consideration in this way, which is often dependent on revenue or profit targets being hit, is also reassuring to nervous buyers because receipt of part of the sale price is contingent on the business’s future profits, so the seller has a vested interest in ensuring ongoing success.
“Vendors generally seem aware that they might have to leave something on the table themselves,” says Rupert Cattell, who sold a brokerage in 2007 before setting up Amberglobe.
“They don’t generally want to – but they often have to.”
With the credit crunch showing few signs of abating, buyers with plenty of cash to hand are well positioned to take advantage of an uncertain market. “Sellers will get the red carpet out for a buyer who can proceed,” says Michael Taylor. “It’s a buyers’ market if they have cash in their pocket.”
Generally, buyers and sellers alike are excessively circumspect. “It is a tough marketplace,” says Taylor. “People are a lot more cautious. Every I has to be dotted every T has to be crossed – that’s from the buyer’s point of view, the buyer solicitor… everyone is looking into so much more detail because they’re so nervous.”
The relentless media diet of gloomy economic news and analysis is compounding the very real problems of huge debt, anaemic growth and rising commodity prices. “It’s doom and gloom all the time and it completely undermines confidence,” says Cattell.
“There were some statistics the other day about the collapse in manufacturing during April and May, but factory output dropped because of Easter and the Royal Wedding.
“The media seem determined to kill any confidence in the market and are not doing anyone any favours at all. They’ve worked out that doom and gloom sells better than good news and it’s very frustrating.”
But there are remains cause for optimism for buyers blessed with plenty of liquidity or for sellers who can show interested parties a healthy balance sheet and solid trading history.
Sellers of internet-based businesses can justifiably feel sanguine too, reports Taylor. Not only are dotcoms often modestly priced if premises aren’t part of the mix, but online spending has risen inexorably even as the high street suffers – 19% higher over the first half of 2011 than the same period last year.
“We get a lot of interest in online retailers, which can be operated from home or industrial parks rather than in the city centre where you’ve got big rent and rates. The secret is low overheads.”
