Due to the pandemic, is there an increase in the number of owners selling?

by a searcher from Babson College - F.W. Olin Graduate School

3 years ago

Prior to the pandemic, I spoke with searchers frustrated that it was hard to get firm commitments from owners to close deals. And the deals were generally at higher multiples than traditionally exist when buying small businesses.

Question out to searchers - has the dynamic changed significantly over the last couple of months? Are you finding more people willing to commit to deals?

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searcher from California State University, Los Angeles

I think this is a great question and one that we all have on our mind. In my experience, it takes some time for companies to feel the affects of this kind of downturn. Couple that with the banks giving grace periods, regulators from the banks giving banks grace periods, and the amount of free and cheap capital being injected into the business world - Things are being delayed. Moreover, with the amount of capital being injected, we are going to see multiples for good companies increase significantly and the space become more competitive. The distressed deals, as was mentioned above, may come to more fruition. However, it is a very risky endeavor to try and turnaround a company for many reasons. However, the biggest one is simply employee fatigue. Having an owner that was already stressed passed this down to every one of his employees. So, it takes a very confident leader to jump into a turnaround situation and capitalize on it. Not to discourage anyone from doing this, however, as it can be extremely lucrative. I would say we will see a slow increase on the sell pick up sometime by end of this year and accelerate into early next year as full FYE numbers will be available.

3 years ago | like reply | 2 likes

investor from Hobart and William Smith Colleges

Distressed opportunities are picking up quickly, much faster than consulting because banks are giving everyone a 90 day free pass. But some folks can't wait or walked into this pandemic already in trouble. There seems to be a new one every couple days.

Searchfunders should go find distressed industrial deals that we can partner on, acquire and they can have an appropriate leadership role. Waiting for healthy deals to return may take a while.

3 years ago | like reply | 1 like

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