Is Now A Good Time To Sell Your Business?

Strategy

Tabak Christchurch have made a compelling difference to over 40 business owners lives over the last five years, and the witness to that is the testimonials and referrals received from both buyers and sellers of businesses. Tabak takes great pride in what it does, in the knowledge that not only does everyone win from a successful sale, but they move forward with enthusiasm into a new chapter of their lives.  Damien the author of this article has either managed or owned private companies within manufacturing; import & distribution; IT and professional services, and he has also completed a tertiary degree (BCom), and post-graduate qualifications (MBA). Industry-specific qualifications have also been obtained in accordance with the NZREAA 2008; and its associated continuing professional development.

 

There is no doubt that since the GFC (Global Financial Crisis) the value of business sales in New Zealand has significantly reduced. This is due in part to businesses making less profit, and therefore being less attractive; and the difficulties in obtaining finance with which to make the purchase. However Tabak’s experience is that the bottom of the market was back in the 2011FY and sales are definitely improving again – both nationwide, and within Canterbury.

Reasons why Tabak believe now IS a good time to sell include:

  • Record levels of recent sales
  • Banks’ improved appetite for lending
  • Improving pipeline of “larger businesses”
  • Canterbury driving NZ’s GDP growth in next five years i.e. strong markets within most industries
  • Beat the “baby-boomer” bubble

Recent Sales

Tabak Christchurch sold more businesses during the 2012FY than ever before. Indications for the new financial year are also very positive with four more sales in “due diligence” at the time of writing; and our Queenstown branch is also experiencing increased demand from both buyers and sellers.

Pipeline (or WIP)

Our South Island “pipeline” showing businesses that Tabak is either marketing; preparing for sale or valuing is now around $50m. This is the highest it has been for some time, and includes several larger businesses in the $1m to $5m category, that are now performing strongly.

Bank Lending

Most bankers (and economists) would agree that lending is unlikely to be returning to the days of pre-2008 any time soon (and it could be argued “nor should they”). The virtual disappearance of the second tier finance market is starting to be filled by non-bank lenders/finance brokers such as www.tbkcapital.co.nz and the six main banks are clearly now “open for business”. Cashflow lending remains a more challenging proposition but deals are being done and there is an improved appetite for lending that was missing several years ago.

Canterbury/South Island Market

The Canterbury EQ’s are resulting in an unprecedented amount of money that is being recommitted to the region over the next 3-5 years. There will be a significant flow-on (or multiplier effect) throughout the region, and in all likelihood, the South Island. This will ensure that most businesses, including those not directly feeding into the rebuild, will experience improved demand for their products & services.

The Baby-Boomer Bubble

It is an oft-reported fact that the average age of business owners is increasing (now somewhere between 55-60) and at some stage these owners will want to realise the value in their business for a tax-free gain i.e. sell the business. The challenges of the recession; GFC and (in Canterbury) the EQ’s have all delayed business owners from acting in the last three years. People do not live forever and Tabak’s view is that this “supply-side” bulge will start sooner rather than later….so a vendor wanting to come to the market prior to the “bubble” will need to move even more quickly.

Whilst it may be in Tabak’s interests to “talk up” the market, the above points are all FACT – not opinion, and it is for this reason that Tabak are firmly of the view that now is a good time to sell your business.