Macroeconomics and Selling a Business

In a recession people naturally pull back with purchasing items.

Usually this is more consumption related, but of course, investment wise.

The question then is posed – does the macroeconomy play a factor in acquisitions.

There’s three ways to look at this and it’s about how you position your sale.

Transactions in M&A, as a whole are down in a recession. There are less deals. But that predominantly affects Corporate America. There’s less money on the balance sheet to do M&A deals and absorb smaller companies.

With your business, you are probably just selling one business and one business only.

You just need one buyer. Not the whole economy to line up with what’s going on.

That’s first.

Second, is you must understand when you own a SMB, you might have predictable cash flow.
That is something that is absolutely a necessity for people, especially in a downturn.

People want predictable cash flow.

It will move fast enough, in a recession sometimes if the multiple is right.

People overpaying for a business will soften, and that’s what you don’t want to fall in the trap of. Having an unattractive business or asset that is priced too high. There’s too many businesses priced in the right ballpark to compete against, for a pool of buyers looking for acquisitions who can afford your SMB.

There’s no shortage of people in the U.S. with enough money to buy your business in 100% cash if they liked the business.

The key is how do you get in front of the people who are ready, willing, and able, and also who do like your business.

That’s about marketing.

People buy businesses typically for the cash flow, but sometimes they buy it because they are bored and have a surplus of cash sitting around. Those buyers can tend to fade in a recession. Those aren’t your bread and butter M&A buyers. Think of it like real estate, but in a smaller quantity. When the market is amazing, people buy 2nd and 3rd homes. These buyers are more limited in nature who buy businesses as opposed to additional real estate, buy they do exist and they will kind of fade in a recession.

The key is who has a stable of high quality M&A buyers who have multiples they stick to, and are you priced to sell within those multiples. If you’re trying to maximize value and are over the multiple range, then you just may need time to sell it and more leads to interact with.

Who you list with, makes a big, big difference because they understand how to guide you through the sale.