MEDIA RELEASE: While rising inflation and interest rates are affecting many Australian households, it is unlikely to impact the saleability of well-managed, profitable businesses, according to the corporate advisory division at HLB Mann Judd Sydney.
Restructuring and risk partner, Todd Gammel, said business owners considering a future sale should use this period to prepare the business and ensure they are well-positioned to take advantage of any opportunities.
“There are a number of private business owners who want or need to exit but are concerned that market conditions are challenging and unpredictable.
“However, there is still capital to be deployed for solid, well-run businesses. Good businesses will always find a home so now is the time to take whatever steps are needed to get the business ready for sale,” he said.
Mr Gammel said while Australia could potentially enter a recession, it is likely to be more muted than expected, albeit some sectors – namely construction, retail and transport – will continue to be impacted by global issues.
“Construction has been hit particularly hard over the past couple of years through both supply issues, weather and labour shortages. If the local economy were to weaken further, these existing issues may become more pronounced and problematic for a lot of businesses in this sector,” he said.
This could lead to projects being delayed due to concerns on costs, sale values and delivery time until conditions improve, and is the biggest risk for the industry to manage.
However, for other businesses, the depressed market will create opportunities which then accelerate as the economy improves.
Advisory, audit and assurance partner, Simon James, said the economic uncertainty should therefore reinforce the need for owners to ready a business for future sale.
“Business owners should always be exit-ready and, depending on factors such as the lifecycle of the business and the personal circumstances of the owner/s, the strategy for every business will be different.
“However, every business owner – irrespective of industry, sector or size – should know what their business is worth at any point in time. Earnings over the last two years have been impacted by COVID, making future earnings harder to forecast, but it’s critical to know the value should a potential acquirer present themselves,” he said.
Mr James said the value of a business should be supported by a strategic growth plan, which incorporates earnings growth and the acquisition and retention of key personnel. Potential acquirers will expect these plans to be formally documented before progressing to the due diligence stage of a possible sale.
“With lingering uncertainty, now is an opportune time to get documentation in order, including management reports and budgeting. It can be tedious and time consuming, but it will be a worthwhile exercise and positions the business more favourably.
“There may be an appetite to acquire distressed businesses and drive value for less than the costs to build the business and create greater overall value or a saleable asset.
“It’s also a good time to consider the value proposition of the business, and why. Familiarising yourself with possible acquirers and their motivations provides business owners with insights before formal negotiations commence,” he said.
