David J. Mahmood is founder and chairman of Dallas-based investment bank Allegiance Capital Corp. The firm is a mergers and acquisitions financial services advisory firm specializing in private businesses. Mahmood created and sold seven businesses before launching Allegiance in 1998.
Mahmood talked to the Dallas Morning News about five reasons for selling your business now.
—1. It’s a seller’s market: Demand is trumping supply for middle-market businesses. That puts business owners in a position to get top dollar for their companies today.
—2. Valuations are up: This weak supply of privately held businesses for sale has buyers competing hard to get deals done. As competition increases, so do the valuations that investors are willing to pay. A recent report from PitchBook found that the total number of deals declined in 2013, but deal value and deal multiples went up compared with 2012.
—3. Buyers have capital: Thanks to a steadying economy, there are more buyers than ever before. Because this trend is still in its nascent stages, sellers are scarce. There is also more money on the sidelines than ever before. Corporations and private equity groups are both hungry for good businesses.
—4. What goes up must come down: Sell high. Many industries are seeing a huge upward trend in numbers. That’s typically the best time to sell. Timing the market has proved to be a flawed strategy for sellers, who, if they delay too long, end up waiting for the next cycle. It’s better to sell when there is still meat on the bone and buyers are interested in buying.
—5. Changing demographics: As baby boomers age, the number of sellers will explode. By 2020, it will again be a buyer’s market because businesses for sale will flood the market as boomers seek retirement. Now may be the perfect time to get in front of that curve for most privately held businesses.
Source: MCT Information Services