At first glance it may seem as if the current state of the U.S. economy is not conducive to selling a business. However, contrary to that belief, there is no better time than the present for a U.S. small business owner to sell his or her existing business.
In the past several years, individual buyers have played a prominent role in small business acquisitions. With the growth in executive salaries, many corporate executives were found leaving corporate posts, taking off their shirts and ties, and becoming their own boss. At that time, capital was flowing freely from our Country’s lending institutions and the mergers and acquisitions market was booming.
Since then, things have changed. The capital markets have softened and lending institutions, led by the U.S. Small Business Administration (SBA), have significantly tightened lending requirements for SBA guaranteed loans. As a result, loan supply has decreased and individual buyer demand has softened.
This shift in the capital markets and individual buyer activity by no means indicates a softening of total buyer demand for existing U.S. based small businesses. Actually, quite the opposite is true. Demand for the purchase of existing U.S. small businesses has increased. The change that has occurred is in who is buying.
Both public and private companies, domestic and foreign are actively pursing the acquisition of stable U.S. based small businesses. The weakening of the U.S. dollar relative to foreign currencies is fueling acquisitions by foreign companies while the slowdown of the U.S. economy drives domestic acquisitions.
As disposable income among U.S. consumers decreases, consumers and existing small businesses are spending less on corporate products and services. The result, corporate profits are stagnant or declining in most industries. Factor in the trend among U.S. corporations to stockpile cash in anticipation of a prolonged recession and corporate balance sheets are poised for acquisition. Corporate management teams are currently looking to the acquisition of U.S. based small businesses as a means to grow earnings and appease shareholders.
This is creating a seller’s market for small business owners. Small businesses which historically have flown under the radar of corporate acquirers are now directly in the crosshairs. Business owners must be aware of this current trend of corporate America in order to take advantage of the opportunity to sell their business interests.