Are you seeing some sellers motivated due to pandemic?

December 10, 2021

by a searcher from University of Puget Sound in Portland, OR, USA

I'm curious to hear if anyone is seeing some buyers more motivated to sell their business as a result of the pandemic and the impact it is having on how they run their business. For example, are you aware of business owners who were planning to sell in a few years more willing to sell sooner rather than later? If so, what are the specifics of their reasoning, and is it resulting in a discounted purchase price?

I can imagine some seasoned owners not excited about navigating the unprecedented challenges around finding and keeping talented employees in this marketplace, addressing the ambiguity and unknowns regarding potential mandates they may or may not face, etc. etc. and deciding now is the time for them to sell even if at a discount.

Reply by a searcher
in Alpharetta, GA, USA

My experience has been the opposite. Number of listings has declined and offer prices are higher. I believe the increased uncertainty last year led many business owners who would have sold to maintain the status quo, rather than go through the challenge of marketing and selling their business. So that affected supply. And then all the excess liquidity in the market has created an everything bubble and SMEs are not immune. I’m seeing small cleaning businesses (sub $250k SDE) trade at 4x. It should be 2.5x. And institutional buyers are now buying businesses with sub $1mm EVs. So you have more competition, lesser supply and prices increased as a result. Time to be patient and wait for inflation to push up rates and push down valuations.

Reply by a professional
from University of Dayton in Columbus, OH, USA

From a US perspective, one of the biggest motivations I saw in 2021 was owners that were coming up to their window for selling (1-5 years) were looking to sell quickly due to the uncertainty around proposed capital gains tax increases. If the proposed changes went through, it would take significant growth to keep the take home amount after taxes the same as today's capital gains tax. Most business owners weren't interested in running extra hard just to stay in place.

While some business maybe recovering losses, certain industries are seeing banner years for order intake (revenue is a different animal due to supply chain constraints) as consumption in America is at all time highs.

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