From the Trenches - Interview With Pennsylvanian Business Broker Bill Ilgenfritz

Bill Ilgenfritz

Current market perspective from the trenches of the business acquisition & sale industry

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Sit-Down Interview With Business Broker Bill Ilgenfritz

What are your thoughts on where business acquisition & sale market activity is heading over the next 3-6 months?

Since the start of the COVID-19 outbreak and the regulations placed on businesses, various industries have been experiencing different impacts. 

While supply chain issues and travel restrictions hit most businesses, some industries were not forced to shut down and were at least able to continue generating cash flow.  Some even thrived.  While many companies that would have been looking at M & A had to concentrate most of their focus on their own companies and spend less time seeking growth, some entrepreneurs interested in industries relating to healthcare and distribution are even more committed now to purchasing a business in those fields.  And displaced corporate leaders who had to be furloughed found themselves determined to invest in their own business to be more in control of their future.

There will definitely be challenges like due diligence taking a longer period of time and negotiations having to be more creative, but there are also more incentives out there thanks to efforts to stimulate the economy and small businesses that prospective buyers can take advantage of.   

Here in the Greater Pittsburgh Area, there are even a lot of new grant and loan programs for assistance from the PA Statewide Small Business Assistance Program, Urban Redevelopment Authority of Pittsburgh, and many grants aimed at female entrepreneurs to encourage small business. 

I foresee many business owners with successful businesses who are close to retirement age being more committed to selling in the near future to retire and as long as sellers have realistic expectations of length of time to sell and the value of their business, I look for acquisition and sale market activity to grow.

What do you see as the most significant SELF-IMPOSED threats out there that could hurt the market for business acquisition & sale and small business activity in general?

​Letting uncertainty and fear paralyze the market. If current affairs have taught us anything, it is that where there's a will there is a way. When business owners looked at their processes and started to think outside of the box and be flexible, they were able to survive and sometimes thrive even under intense pressure and limitations this year. 

Buyers, sellers, and financial institutions will need to be willing to overcome the fear this year has brought and seen all the opportunity that is out there.  Because even in this injured economy there is a lot of opportunities.

What do you see as the top three reasons to BUY a business in 2020?

1. Business owners who worked hard to keep their business thriving in this COVID economy and who are close to retirement age will be even more motivated to sell and retire.  This will put some really great business opportunities on the market.

2. Buying an existent business that has managed to survive and generate profits even in this tough economy, and that has a customer base is a great choice for someone looking at wanting immediate cash flow and to obtain financing from an institution that will be more likely to lend to an entrepreneur when the business has a proven track record even during adversity.

3. There are some great incentives out there including low-interest rates on loans thanks to stimulus programs.

What are some of the questions a business owner should ask when choosing an advisor to help buy a business or work on exit planning to help navigate through this challenging stretch?

Business owners should ask advisors the following questions:

1. What is their track record and experience with selling businesses?

2. How do you value a business?  3.  What do you do for your fee?

3. How do you find serious buyers? 

4. How will confidentiality be maintained?

5. And most importantly, I tell owners to ask themselves is this advisor someone I feel I can work closely with for the next 6-12 months and someone that I can trust?

What are your thoughts on transaction terms for buyers & sellers in the current market?

Due to the uncertainty and fear surrounding businesses being mandated to shut down and/or operate at reduced capacity, I think buyers will be very focused on how to protect themselves. 

Sellers and buyers will be more creative in negotiations to try to protect their interests. We may see earn-outs and contingent considerations added to negotiations on price. Especially since closing dates may be longer than usual due to the time it will take for concerned buyers to conduct detailed due diligence in the era of COVID 19. 

Buyers may ask for MAC clauses (Material Adverse Change) so if there are any significant changes to the business between signing and the closing the buyer can walk away.  And sellers who are willing to offer some seller financing may help alleviate buyer concerns about procuring financing through cautious financial institutions for purchase. 

But there has never been a better, more acceptable time to be willing to negotiate terms…