These folks are selling their businesses more than anyone else
(This post originally appeared on The Washington Post)
If you’re an American manufacturer, this may not exactly be the time of a “manufacturing renaissance” as this year’s presidential candidates like to talk about. Instead, it may just be a good time to sell your business, and you certainly won’t be alone.
That’s my take-a-way from the most recent Market Pulse Quarterly Survey Report published this week by the Pepperdine Graziadio School of Business and the International Business Brokers Association.
According to the report, small manufacturers grossing between $1 million and $50 million per year were the number one sellers of businesses during this past quarter, beating all other industries including distributors and service firms. Owners of restaurants and service firms were the biggest sellers of any industry grossing less than $500,000 and $1 million per year, respectively.
“Clearly, the study shows that if you’re a manufacturing owner and considering retirement, you should talk to your advisor now and consider your options,” says Mitchel Cox, founder of the business brokerage Transworld Business Advisors, in the report.
Most of the buyers in this sector were mainly looking to grow their existing operations with many also desiring to replace their corporate job with a new company. Sellers listed retirement, health issues and burnout as among the top reasons they were cashing out.
In the largest deal category (businesses valued between $5 million to $50 million) private equity made up the largest buyer group with individual buyers accounting for only 17 percent. Another sign of a hot market is that most buyers aren’t getting much of a discount. For example, businesses in the lower middle market received 98 percent of the internal benchmark set by the advisor and seller.
All of this is good news for sellers, particularly in the baby-boomer segment. And even better news if you’re in the manufacturing business. But as we all know, nothing ever stays the same.
“We know that good markets don’t last forever,” said Scott Bushkie, a broker and chair of the International Business Brokers Association. “We’re in the second longest bull run, only behind the bull run of the 1990s leading up to the dot.com crash. We have to assume market conditions will shift, but whether that’s six months or three years from now is anyone’s guess.”