PRZOOM - /newswire/ -
London, United Kingdom, 2010/10/28 - A generally positive but also fragile and uncertain economic future is the outcome of a survey of thousands of business buyers, sellers and business brokers from around the country by BusinessesForSale.
The survey points to many prospective business buyers wanting to capitalise on low credit rates and a perceived buyers’ market for business opportunities.
By far the most common reason given by the 81% who believe it’s the right time to buy a business is that continuing economic uncertainty promises low prices, with about half (49%) citing this reason.
There are also signs that the credit drought is easing, with marginally more buyers finding it easy to obtain credit than difficult – 28 vs 26% respectively. However there is a wide range between countries severely affected by the recession such as the UK and South Africa, and those less so such as Canada or Australia. At best nearly 40% of buyers said they got credit easily, but at worst it was below 20%.
However this bounce may end as higher quality business owners evaluate their options, as one broker observed: “Extremely low interest rates deter business owners from selling their businesses as they can nowhere near replace the income they derive from their businesses when they come to investing the capital in the proceeds of sale.”
The businesses-for-sale market has always been a useful economic indicator. Previous research from BusinessesForSale.com has shown that an increase in both business values and the quality of businesses has often presaged an economic improvement a few months later and vice versa.
While brokers generally believe there are more businesses on the market than before, a growing mismatch between buyer and seller expectations has developed, particularly regarding valuations.
Some business owners see economic green shoots as justification for charging a higher price, while buyers see continuing turbulence as a licence to drive prices lower. 55% of brokers reported an increase in buyers dropping out of the sales process. Again Australia and Canada had the best of the results.
One of the most consistent metrics across all countries was buyers’ opinions on asking prices, where no country deviated more than a couple of percent from the average - 62% of buyers worldwide believe that sellers’ asking prices are too high, while 38% feel they are about right. This perhaps indicates that buyer sentiment owes more to their general mistrust of asking prices than economic factors.
In terms of which sectors are performing strongly, whilst there were some strong regional differences, food was a general favourite in most countries, with 41.6% of brokers overall reporting a surge, the largest rise posted, in a ‘flight to safety’ to an industry widely considered relatively recession-proof. The second steepest sales rise, 31%, was reported in services, unusually one of the sectors that would usually rebound later from a recession. Conversely retail, which usually performs well coming out of recession, and again food were reported as the biggest fallers, 38% and 33% respectively. There’s a mismatch with demand here because these sectors are most in demand among buyers, with 40% and 30% expressing interest in food and services respectively.