Considering the current environment, is now a good time to sell a business? In the industries that we typically work in (waste, recycling, trucking, logistics, food service, contracting), the M&A activity is off the charts right now. Given rising inflation, labour shortages and the escalating situation in Ukraine, if you are even on the fence about whether or not you want to sell your business, I would advise you to take a serious look at your exit options. On top of all that, the Federal Reserve is planning multiple rate increases this year. Given that, as well as the economic and geopolitical issues facing the United States and the world, there is no telling what the capital markets could look like a year from now. A deal that requires any sort of financing may be difficult to achieve 12 months from now. In short, I do believe it is a good time to sell your business, especially if you are a closely held business. There are quite a few industries right now that are being aggressively consolidated and valuations are very high. This is absolutely a great time to sell, but if you are serious about doing so, I would start the process right now. The last two years have shown us how rapidly things can change, and I would not be surprised if 2023 looks a lot different than 2022. What are your top tips on planning an exit? The number one tip I could give anyone who is trying to sell their business would be to stay organised and have all your information accurate and up to date. I am helping a closely-held family business sell right now. On top of being great people, they have also run their business exceptionally well. In a matter of a week, they were able to provide me with audited financials, tax returns, asset lists, customers by revenue, large contracts, etc. I could tell right away that their information was accurate and that I could trust it. When I am negotiating with buyers, it is a huge advantage to know that what I am selling is accurate and that I will not get a surprise right before closing that results in the owner taking a haircut. The next tip I would give to anyone considering selling their business is to explore getting a quality of earnings (QoE) done. Every deal I have been involved with, whether it is getting a commercial loan for a client or helping someone sell their business, has involved one of the parties getting a QoE done. A QoE is a “mini audit” that is not as long or costly as a full audit, but it gives instant credibility to the financials that a company provides. My next tip would be to check your expectations going into any deal. Your business is not worth what you think it is, it is worth what the highest bidder is willing to pay. We have met numerous owners who have unrealistic expectations about what their business is worth and it can ultimately cost you value. At my old job, I was leading the acquisition of one of our local competitors. We offered him $3.5MM for his business, he wanted $5MM. We ultimately walked away from the deal. Over the course of two years, he lost a few big contracts, had a couple of trucks breakdown, and a key employee left. Just two years after our initial offer, we bought him for $1.2m. You should absolutely get what your business is worth and fight for it, but also remember that it is not you the business owner who ultimately decides how much your business will sell for -it is whoever is willing to pay the most. Finally, continue to run the business as if the deal will not go through and you are going to run your company for the rest of your life. Until all the documents have been signed and the money is in your bank account, a million different things could happen that could derail the deal. I have seen many business owners think they are going to close on selling their company then begin to neglect the day-to-day operations of the “There are quite a few industries right now that are being aggressively consolidated and valuations are very high.” Bus i ne s s & Economy 30 Finance Monthly.
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