When we talk about recapitalization, we’re talking about a partial sale of a company that allows the owner to liquidate some of the value they have in their business. Typically, this involves selling a part of your equity (usually 70-80%) to a third-party, however some business owners do sell just a minority stake.
Talk to anyone trying to buy a house right now and they’ll tell you competition is tight. In certain price ranges, buyers need to put an offer in fast (like the day it’s listed fast) and should expect stiff competition. According to data from Zillow, new for-sale listings are down about 25% over a year ago but house values are up 4.3% year-over-year.
SBA relief efforts are incentivizing buyers to move ahead with business acquisitions. Per the SBA website, “the SBA will pay six months of principal, interest, and any associated fees that borrowers owe for all current … as well as new 7(a), 504, and microloans disbursed prior to September 27, 2020.”
Many business owners have preconceived notions about who will buy their business or whether it’s even salable at all. A lot of owners think their most likely buyer option is the competitor down the street. Maybe that was true, once upon a time. But the M&A world has changed dramatically—and continues to evolve.
According to the Q1 2020 Market Pulse Report published by the International Business Brokers Association, M&A Source, and the Pepperdine Private Capital Market Project, advisors reported that of the small and medium businesses currently for sale, about 35% had closed, 40% were operating at partial capacity, 4% had benefited, and 21% remained unaffected by COVID-19.
You want to know you’re getting fair market value for your business. The best way to do that is to create a structured transaction process.
Recently we have been getting a lot of questions asking if now is a good time to sell or buy a business and how would the business value be affected due to the coronavirus. A lot of businesses are Thriving during the COVID-19. Buyers will take advantage of the incentives offered by the SBA in addition to the already low-interest rates. We are seeing growth in business in the following industries. Click the Link to Find out more:
KnowHow held a panel on how COVID-19 has affected the acquisition of restoration businesses. We sat down with industry experts Gokul Padamanabhan of Restoration Brokers of America and Scott Bushkie of Cornerstone Business Services who unpacked the common mistakes they see among businesses who sell, and the impact COVID-19 is having.
Highlights from the Cornerstone State of M&A Market 2020
The market doesn’t like uncertainty. Certain buyers are retreating into wait and see mode, waiting to see how long the lockdowns will stay in place, how supply-demand issues will shake out, and whether we’ll hit a full-blown recession. But opportunities happen when others retreat. That’s why the coronavirus pandemic could be the best opportunity we’ve seen to buy a business in the last five years.