At the Business Sale Report we have undertaken a straw poll of the business brokers and other professionals in the small to mid-market M&A industry to see how they thought 2010 would be for the buying and selling of businesses. Subscribers to the report can see who said what. So here are some of the opinions of the movers and shakers in the industry:

“Investors seem to be thinking that 2010 will be an improvement on 2009. People who have access to liquidity are making tentative signs they are willing to invest in the middle of the year when the situation should be clearer. Investors who can be creative when it comes to financing a deal are in a great position.”

“At the moment there appears to be a disconnect between the real business world and how the bankers who are funding businesses are operating. Recently there have been more signs of banks lending but they are only lending to people with a good track record, and also really only looking at one project at a time. However, some banks are lending at 75% debt for equity. The February bank reporting season will be important for the confidence of M&A in 2010. Asset-based businesses and those involved in the Internet I expect to be the best M&A prospects for 2010.”

“The market in businesses valued at between £1m and £2m has seen growth so far in the last quarter. I am therefore very positive about the outlook for 2010. People are looking to sell at the moment and funding is not too difficult for the right deal.”

“I am expecting 2010 to be better than 2009 but the outlook for 2011 is more uncertain as there may be more forced sellers then and prices for businesses will fall.”

“Some businesses are happy to sell assets to strengthen balance sheets. There will always be deals to be done but I envisage more forced sellers. My advice to anyone looking to buy a business in this market is to stick with what you know, as there are good deals to be had.”

“If unemployment hits 3 million then we will be in trouble. There are simply not enough smaller businesses on the market at the moment and demand has outstripped supply for good businesses. People are desperate to buy for turnover, as they want to exit in 5-10 years. People are not coming to the market as they think they will not get a good price. If the business is a good one and there are synergies with the buyer then businesses are selling for decent money.”

“There is no appetite for acquisitions of businesses with a high premium on goodwill. The banks have a policy that they will only lend on the value of goodwill if assets of the same value are used as collateral for the loan. I cannot see a revival of fortunes for engineering businesses for 2010. However I believe that Health and Safety businesses and those involved in the medical sector will be in demand next year.”

“I expect 2010 to be better for buying businesses but we are starting from a very low base. With a low volume of private equity transactions it is hard to gauge how strong the Limited Partnerships will be going into next year, as they haven’t really been tested. An expected change in Government will no doubt cause some uncertainty for the prospects in 2010.”

So there we have it, a mixture of positive and negative sentiment on the prospects for 2010. We certainly agree that any business with a good asset base and with good contracted positive cashflow will be a good prospect. To find out who said what, you will need to subscribe to the report. We believe that 2010 will be a good opportunity for buying businesses as long as you know exactly what you are doing as mistakes will be very costly. Make sure you have done good due diligence, have a good relationship with your funding partners and be ready to move quickly.

If you enjoyed this post, make sure you subscribe to my RSS feed!

Entrepreneurs considering selling their businesses over the next year are breathing a sigh of relief today as the chancellor, Alistair Darling, held back from lifting capital gains tax rates in today’s Pre-Budget Report.

Expectations in many quarters were that the chancellor would raise the capital gains tax rate to between 20 – 30 per cent, in a bid to shore up public finances and align the CGT rate more closely with the new 50% upper level of income tax.

In our view, the decision to keep the CGT rate at 18% was certainly the right decision, as a rise in the rate would have a very negative effect on investment in general in this country, affecting the risk sentiment of that very important sector of our economy – entrepreneurs. The 10% Entrepreneurs’ Relief also remains in place.

The government announced its intention to extend the Enterprise Finance Guarantee scheme, which has helped around 6000 businesses receive commercial loan funding so far. The extension should guarantee another half a billion pounds of loans to be granted to small UK companies.

It is also encouraging to see that empty property relief has been extended, which should help many smaller businesses escape business rates on their empty properties where the rateable value is below £18,000.

If you enjoyed this post, make sure you subscribe to my RSS feed!

During the third quarter of 2009 the Private Company Price Index (PCPI), which gives an indication of the average multiple of after tax profits at which private firms are sold for, rose again – much to the delight of anyone looking to sell a business. This is the second quarter in a row that we have seen rising multiples being paid. Please see our previous blog on business valuations rising posted in October.

Although merger and acquisition activity declined in the third quarter, for the seventh consecutive period, the multiples of profits at which business for sale are being sold for increased by 5 per cent. With the 5 per cent rise, people selling businesses were achieving an average of 11.7 times their historic after-tax profit. Of course, it should be noted that these figures relate to announced deals which have an average deal size of £15m. Smaller businesses multiples are lower overall to reflect the increased risk but if you wish to have a guide on the possible value of your business then please feel free to fill out our form for a no obligation business valuation

In addition to improvements in the PCPI, the Private Equity Price Index (PEPI), which tracks the multiples of profits that businesses sold to private equity achieve, also reported good news, rising 4 per cent to 12.3 times.

The continuing slow M&A market can be partly blamed on a more restrictive lending policies, particularly within the leveraged buyout market. This is reported to have offset the benefits an increase in corporate bank debt available to people wanting to buy a business for sale.

The increase in confidence among the corporate finance community has helped to boost the amount of money companies are being sold for. In addition, the number of exit reviews, proposals and pitches is increasing in response to a change in sentiment among business vendors. Many are realising that income and capital gains tax increases will catch up with them next year and that selling a business takes several months to complete – leading to an increase in the number of business being put on the market.

Business Sale Report has seen a 20 per cent increase in listings in the past quarter! To contact the sellers of these businesses then please subscribe.

If you enjoyed this post, make sure you subscribe to my RSS feed!

If you have a successful and profitable magazine title to sell, and a genuine reason for selling it, you are likely to have very few problems doing so. Buyers want to see forecastable future cash flows and authentic reasons for selling. In these circumstances, you can achieve a high price for your publication.

Of course in this day and age the internet is a vital channel for your magazine readers. Even if you have not yet fulfilled your plans for an online version of your title, a detailed plan on how you will create this will usually encourage buyers to be interested.

Timing is vital when selling a magazine title. Proving you can make money from the title is crucial as investors are no longer keen to risk precious cash on a risky forecast alone. Make sure you can show potential buyers that there is money to be made from their purchase.

Understanding your buyers can help you to establish the best way to market your title – talk to industry buyers about synergies and speak to financial buyers about profits – basic really!

Having the best possible advisors on board to help you with the sale will really help you to achieve the best price when selling a magazine title. They will be able to give you an objective view of your business, they will know who the likely buyers are, and will be able to spend time on marketing your magazine for sale. This will allow you to concentrate on running the business instead of getting wrapped up in emotive negotiations. Also don’t forget to get good tax advice not least because selling business assets (i.e. a title) is treated differently from selling business shares. For more information on these issues you can subscribe to the report.

For help on determining the value of a magazine title then please fill out the no obligation business valuation form.

If you enjoyed this post, make sure you subscribe to my RSS feed!

Common logic dictates that it’s better to buy than to sell during a recession, when prices are low. That’s certainly the logic that prevails in the property market, but is it also true of selling a business?

Certainly it can be a challenge to sell a business and get the terms you want, but it can be done.

The first thing you should do if you want to sell your business during a recession is to demonstrate that your company can show profitability in the peaks AND troughs of the economic cycle.

You should also prepare a plan that you can show to prospective buyers, detailing the growth potential of the business.

Finally, you must be prepared to negotiate payment terms. It’s a lucky seller indeed who can persuade a buyer to part with 100% of the money upfront, especially in the current climate. It’s more realistic that a buyer will want to negotiate staged payments or even an earn-out period.

Vendor-financed deals are working very well in this climate, but if this is something you want to pursue you should definitely talk to a professional advisor about the best way to structure the deal.

If you enjoyed this post, make sure you subscribe to my RSS feed!

In this month’s (June 2009) issue of the Business Sale Report, we feature an exclusive interview with Luke Johnson, the serial entrepreneur who made his first big move with the purchase, with Hugh Osmond, of Pizza Express back in 1993 for £15 million.

Since then Luke has owned or part-owned over twenty businesses covering industries ranging from dentistry to retailing and recruitment.

In 2000, Luke set up Risk Capital partners, a private equity firm, through which he transacts most of his deals and has produced around £200m profits a year.

We’ll publish the full interview later in June, but in the meantime our Business Sale Report subscribers will be able to read the full interview in the Members’ area from 1st June.

Luke talks about the UK business buy/sell marketplace, how the recession is impacting upon it and how business buying and selling behaviour and activity should alter in these conditions. Certainly there are always bargains to be had, and the economic climate doesn’t stop Luke from actively pursuing deals to buy niche businesses and established companies.

He also reveals his personal pick of the hot niche sectors to be looking out for great business buying opportunities over the next twelve months.

If you’re not already a subscriber, you can do so now at a specially reduced price.

If you enjoyed this post, make sure you subscribe to my RSS feed!

UK warehouses company Brixton is reportedly looking to sell off some of its major assets, in a bid to raise cash to pay off debts.

The company owns warehouses at Park Royal and Heathrow, though it is unclear at this stage as to which properties will be earmarked for sale.

On March 3rd, the company announced that Peter Dawson, formerly Brixton’s Investment Director, was to be appointed Chief Executive. He succeeded Tim Wheeler who was fired from the company after dithering over a rights issue, which now looks too late to implement as shareholders grow more bearish over the property market. The company has a market value of just #48 million now after its shares crashed 90% earlier this year.

If you enjoyed this post, make sure you subscribe to my RSS feed!

It has been predicted by business-recovery experts that numbers of insolvencies in the commercial-property market will dramatically increase in 2009.

Begbies Traynor has predicted that 1,600 British property companies could go under this year alone in the onset of the recession.

It has been reported that numerous landlords have asked their shareholders to raise funds, including Land Securities and Hammerson.

Begbies Traynor has identified 304 UK property companies at severe risk of going into administration due to crippling financial difficulties, using its �Red Flag� early-warning system.

The figure is a 65% jump from 185 companies with escalating problems in the third quarter of 2008.

Nick Hood at Begbies Traynor, says: �We�re seeing a build-up of problems as the real economy in which tenants operate continues to unravel. The only upside has been the fall in interest costs. However, this offers little relief to landlords dealing with escalating tenant defaults and unprecedented difficulty in raising or preserving business funding.�

So there we have it! If you are looking for a business to buy, and reckon you can get your hands on the properties cheaply, remember that once the business has gone into administration the properties will be sold by auction.

If you enjoyed this post, make sure you subscribe to my RSS feed!

Is there a silver lining to the low value of Sterling that has hit the headlines in recent days? According to experts – our exports will be cheaper and so boost manufacturing, companies with foreign earnings will be quids in, and we will see more of our friends from over the pond spending money in our shops. At the Business Sale Report we think there might be another reason the cheap pound could benefit UK plc. Businesses owners who are thinking of selling would do well to investigate the possibility of marketing the business abroad. Overseas investors can buy larger businesses in the UK than they would have been able to do in the past. Of course, revenue would still be in Sterling but if, after holding the company for a while, the currency appreciated then the investor would make a profit on the sale. Inward investment is bound to help UK plc.

In our view, Sterling is undervalued for a number of reasons. In the first instance, the media have gone into overdrive about the state of the economy partly because they love bashing the Labour Government. In addition, there is a perception that we have a poor manufacturing and export base, so increased competitiveness in exported goods is not going to benefit us. This is not really true. The UK is among the leading exporters of manufactured goods in the world. Germany and China, of course, are way out in front. Then comes the USA, followed by Japan. But in fifth, sixth and seventh places, in a tight group, are the UK, France and Italy. What is more some of our manufactured goods like defence, where we are a global leader, are seen as having better than average growth prospects. After all, the world doesn�t seem to be getting any more peaceful.

Also it is quite clear that the Bank of England�s remit is to target inflation and economic stability, not exchange rates. Whereas many countries have made it clear that they are very keen to keep a high value currency, no matter what. This of course is bound to attract capital inflows and speculators at the expense of the pound.

Other commentators have argued that the pound�s fall is partly related to the curtailment of international banking flows into the City. Therefore it becomes an indicator of the perceptions of global financial risk. When risk aversion rises Stirling gets hammered. Things change � after the 1976 IMF crisis the pound rose from $1.65 to $2.40.

The currency issues aside, UK plc is still a very good place to do business especially when compared to other countries. Perhaps the most obvious advantage that the UK has over other European countries is its flexible labour laws, which translate into lower hiring costs, uncomplicated takeover rules, and a generally non-protectionist government that welcomes foreign ownership of UK companies.

In addition, the likelihood of a high number of distressed companies for sale in the UK has attracted the interest of Vulture funds. A recent poll of a 100 funds by Debtwire, the news service owned by the Financial Times, found that they ranked the UK ahead of Germany, France and Russia as places to invest. Another reason for the funds� interest is the relative friendly bankruptcy regime in the UK which is seen as more favourable to creditors compared to other European countries

If you enjoyed this post, make sure you subscribe to my RSS feed!

Pre-pack insolvency practice has had much bad press of late. Tenon Recovery has come out fighting and said that it can help to avoid the �domino effect� of suppliers to the business going bust. Critics have argued it has allowed owners of businesses to buy back their companies with most of the liabilities released, so leaving creditors out of pocket.

Tenon has identified six major benefits to the pre-pack insolvency route that must be considered.

So there we have it, a pre-pack is the best way forward. Or is it?

The problem is that with a pre-pack it can be difficult to argue there would have been a better outcome if the business was put up for sale to invite best offers. It can be argued that once the business had gone into administration all goodwill would have been lost, suppliers would have pulled the plug, and the value of the business and hence the chance of the creditors being paid off would have been reduced. But hey we have no way of knowing… Of course, the other problem with delaying any resolution is if the previous owner/manager tabled an offer for the business that was rejected and then the business completely failed then the knives would be out for the administrators and the lawyers would be sharpening their pencils.

If you enjoyed this post, make sure you subscribe to my RSS feed!