Henry Campbell-Jones, Director at Hornblower Business Brokers, shares why he believes that it's a good market if you're considering selling your business.

Questions we are often asked by prospective sellers of businesses, are “What is the market like at the moment?” and “Is Brexit affecting buyers’ appetite for acquisitions?”.

However, from our perspective, appetite for acquisition remains strong, and we are in the process of preparing and bringing to the market a good number of businesses for sale in our core sectors. So, in our view, this year is certainly set for a good level of business sales and overall M&A activity.

While Brexit continues to dominate the news, we find that buyers tend to remain positive about the future, and it's still business as usual. There is currently a strong demand for the majority of our sales mandates, and we see conditions being very much a seller’s market. There are many buyers and too few acquisition opportunities.

The number of business owners deciding to sell has remained steady, if not slightly declined, but at the same time there is an increasing number of buyers with funds actively looking for businesses to acquire. There are plenty of buyers looking to grow through acquisition and invest in growing a group of companies, both in the UK and from abroad.

Focus remains on the sustainability of the business in terms of its management, key customers, and prospects for growth. In replenishing our stock of businesses for sale in 2019, we remain confident of achieving successful sales of our clients’ businesses and, and here is why:

  • Despite Brexit and other world events, our clients and contacts in the heating & ventilation, engineering, construction, and business services sectors report that they remain busy and expect ongoing growth in demand
  • There are a good number of infrastructure, building and engineering projects underway in the UK. Whatever direction Brexit takes, there is a general consensus that the government will be keen to bolster the economy by ensuring these projects continue to be funded.
  • With continuing confidence among business owners and investors looking to expand their businesses, acquisitions represent an immediate means of achieving compounded growth
  • There remains a high level of cash reserves in both trade buyers’ companies and investor groups’ funds, ready to acquire profitable businesses
  • Interest rates remain low driving further the desire for acquisitions with high ROI
  • More buyers are now able to raise finance to fund their acquisitions which opens up the market to a wider pool of buyers.

Which businesses will sell well in 2020?

Whatever the economic conditions when it comes to sales, mergers, and acquisitions in the SME market, certain factors hold true. Businesses which sell well typically have the same traits, they:

  • Operate in a niche market with strong barriers to entry
  • Have consistent recurring revenue, with clients often locked in by a service contract
  • Have strong profit margins
  • Demonstrate tangible growth and opportunities to expand

Good businesses with sound returns will always sell well. It is also best to sell while you are still successful and enjoying it.

When is it ideal to start the dialogue?

At Hornblower, we like to start dialogue with our clients two to three years in advance of when you are looking to sell. Companies such as our own can offer advice on valuation, and what performance metrics you need in order to achieve your desired deal value, as well as offer general advice on the various options for exiting your business and when is the right time to sell.