11 Nov Around the Web: A Week in Summary
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BizBuySell’s 2022 Q3 Insight Report was recently released, offering a look at transaction trends as well as buyer and seller sentiment. These insights are based on real data from tens of thousands of businesses for sale and recently sold.
Key findings from the report include:
- The number of closed deals reported in Q3 dropped 2% year-over-year and was 4.5% lower than Q2
- Small business asking prices in Q3 dropped 13% year-over-year and sale prices dropped 14%
- Confidence among small business owners dropped to a score of 46 in 2022, down from 57 in 2021
- Inflation and rising interest rates are two major concerns affecting owners’ confidence
- Small business buyer confidence has risen to a score of 54 in 2022, up from 48 in 2021
- Restaurant demand has increased with closed transactions up 14% year-over-year
A recent article from Viking Mergers & Acquisitions entitled “Have You Done the Math on Your Most Valuable Asset?” discusses the importance of a business valuation. Most business owners don’t have an accurate understanding of how much their business is worth. This limits awareness of the financial health of the business as well as issues that need to be addressed.
Reasons for conducting a business valuation include:
- Preparing for the sale of the business
- Obtaining financing
- Developing a growth plan
- Creating a buy-sell agreement
- Estate planning
A recent article from South Florida Business Journal entitled “Ready to sell your business? Here are 4 common issues sellers encounter” discusses important considerations for business owners who are preparing to sell. While most business owners know their industry inside and out, many are new to the world of M&A.
The first issue to consider is sell-side due diligence. This involves thoroughly self-analyzing the business, identifying areas that need to be addressed, and implementing an action plan to resolve them prior to selling so that they are no longer concerns for a potential buyer.
The second issue to consider is looking beyond the purchase price to determine how much you will actually walk away with. This involves things like transaction expenses, indebtedness, working capital, deferred payments and conditional payments.
The third issue to consider is the concept of equity rollover. This is when a private equity firm acquires a controlling interest in the business, the seller stays on as part owner and operator, and the business is positioned for a future higher value exit in which the original seller takes part.
The fourth issue to consider is the option to have transactional insurance. This representation and warranty insurance absorbs risk for the seller.