ENTREPRENEURSHIP THROUGH ACQUISITION
A Reliable Alternative To Chasing Unicorns
From the Trenches - Interview With Wisconsin Business Broker Steve Boylan
Q&A with business broker Steve Boylan on the current state of the business acquisition & sale industry, and where things are headed.
Steve Boylan
Current market perspective from the trenches of the business acquisition & sale industry
Sit-Down Interview With Business Broker Steve Boylan
What are your thoughts on where business acquisition & sale market activity is heading over the next 3-6 months?
I believe M&A activity will slowly pick up throughout 2020. If there is another wave of COVID-19 cases, however, there might not be a major activity increase until Q1 or Q2 of 2021.
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?
Business owners who want or need to sell and have unrealistic expectations for the value of their business, which are often fueled by getting an inaccurate valuation from an advisor who does not sell and value businesses for a living. This is always true, but with COVID-19 affecting revenues and profits in so many industries, business owners need to realize the market dictates what the business will sell for.
What do you see as the top three things the government needs to do to support main street business acquisition and sale opportunities for small business owners through the remainder of this year?
Keep interest rates low, encourage the SBA to lengthen forgiveness periods, and be honest about how we need to manage the COVID crisis.
What do you see as the top three reasons to BUY a business in 2020?
There are still financially strong companies in the market.
Interest rates are low.
If buyers are looking for turn-around opportunities, there will be tens of thousands of businesses unable to weather their current financial losses.
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:
Have you worked as a buyer agent?
What is the process you use to manage and report the results?
How would you rate the current political environment related to small business growth, business acquisition & sales?
Three out of five stars.
What are your thoughts on transaction terms for buyers & sellers in the current market?
In my conversations with multiple M&A advisors across the country and consulting with evaluation companies, we have concluded with the following 3 outcomes:
Multiples will remain unchanged.
Banks and buyers will require a higher percentage of the purchase price to be in owner financing, likely in the 10% to 15% range.
In order to give buyers and banks a sense of what the business would have done if COVID-19 had not occurred, we are taking the March-August time period for the last four fiscal years and calculating the average revenues. Then we provide that as a separate report to buyers and banks for 2020 numbers.
Thoughts on business valuations in today's market?
We work in the Midwest, and what we believe is that most industries will have a slight decrease in market value. What will change more significantly is that acceptable risk tolerance from banks and buyers will be lower due to COVID-19.
