10 Jul Circumstances Impacting Business Valuations
The Business Brokerage Press recent roundtable discussion covered essential topics with a variety of industry leaders. Our guests for the roundtable were Kyle Griffith, Lisa Riley, Scott Mashuda, Darren Mize, Adam Debussy, Doug Whitmire, Steve Mariani, George Giles and Ron West. In this article, we will continue to examine the panel’s observations about the current state of business in 2023 and where things seem to be headed when it comes to valuations. An overview of this webinar event can be found here.
The Work Force
Other key factors include trends that we are now experiencing in different industries. As Mize noted, “hospitality is getting crushed.” There is certainly no doubt that there are hiring challenges. Not only are employees often hard to find, but employees are increasingly less committed. They are tending to look to work various side gigs, meaning that they are not fully committed to their current job.
As a result, managers are having to hire and fire at a higher rate than normal. The panelists concluded that the labor issue is definitely a major factor and that a large part of the labor crisis is in the 25 to 35 age group.
An Atmosphere of Uncertainty
Co-founder of GCF Valuations, Darren Mize, spoke about changes to valuations at this point in 2023. Rising interest rates and other factors, Mize noted, are presenting a challenge for business owners. People are still thinking about selling but there is also some anxiety at the moment, as people wonder “What’s going to happen next?” Business owners are pondering whether it is best to sell or hold on a little longer. That fact aside, large numbers of Baby Boomers will have to sell in the near future, as they will have no choice but to retire.
Mize notes, “While we don’t expect the M&A market to slow for very long, we’re in a transitionary period.” Just as COVID had a massive impact on businesses being put up for sale, the same could hold true for the impact of interest rates.
Mize concluded that “There are unique circumstances that we just haven’t seen come together before at the same time…discounted cashflow for use continues to be the main driver of how we value companies until we get to a point where we believe things are stable.” He feels that everyone is trying to understand what multiples look like in today’s valuation landscape.
In general, Mize feels that multiples don’t really change much and that they are a circumstance of the individual business and the risk that comes with those businesses. Finally, he concluded that it will be another four to five months before activity returns to its 2021-2022 levels.
