In very recent conversations with the founders of two professional services firms currently considering the near-term sale of their businesses, the same exact comment was made to me:
“We definitely want to sell but are so busy presently – and pretty exhausted – we just don’t have the time or bandwidth to devote to this now – we want to get this year in the books and then focus on a sale”.
Sounds reasonable? Sounds familiar?
It is increasingly clear to us from other conversations we are having with prospective buyers – strategic and financial – that they have a somewhat different perspective.
While there remains “money to be spent”, growth, consolidation, or diversification to be accomplished, buyers are already factoring the following into their consideration of potential acquisitions:
- The increased cost of capital
- Higher perceived risk in an on-going uncertain economic environment globally (assuring the IRR before calculating the upside of potential synergies)
- Planning a more “considered” and diligent process
An Inconvenient Truth
From a seller perspective, in one market, we were told that, of every ten firms whose owners want to sell, on average one does on terms that are attractive. That is not a good average by any measure.
But don’t just take our word for it.
West Monroe Partners just published its Q2 2022 Executive poll.
“Headwinds from inflation, geopolitics and talent wars (availability/compensation), push executives toward a majority bearish outlook.”
The report comments specifically on prospects for M&A:
“While M&A can be a popular growth strategy in both up and down economies, it’s less popular when the cost of everything increases – and when it gets more expensive to borrow money against that growth.
A majority (63%) of C-Suite respondents reported that inflation is changing their M&A plans. Of those, the majority (44%) reported that they were slowing acquisitions, and 19% reported their acquisitions are taking longer to close.”
Bearing in mind it most typically takes a minimum twelve months to ready a business for sale, being too busy now to start that process potentially reduces the eventual sales price, negotiation of attractive terms, and increases the time to execute a transaction.
In other words – working harder in the business now may actually reduce your opportunity with the business in the future.
“Ok, I get it. And clearly that is not an attractive outcome. But remember, we are still super busy, pretty successful, with limited bandwidth, and don’t want to get distracted!”
But so were we, the seven of us that now constitute the Team at Indigo Advisors. The firms we each owned/ran at the time were all super heavily engaged with prospects and clients (when does busy actually end anyway?), successful and had limited bandwidth at the point when we each decided we wanted or needed to sell.
We all knew that we needed relevant support. So, we each sought out capability and capacity. And depending on the circumstance, that came by way of Goldman Sacks at one end of the spectrum to a small financial advisory firm at the other. Their respective partnering and input made it possible for us to breathe, proceed, and succeed.
That is our “Why” at Indigo Advisors: Investing our experience to accelerate your success.
Our work is focused exclusively on helping the founders/owners/leaders of professional services firms grow and/or sell their businesses on attractive terms in an acceptable timeframe.
We learn about you and your business quickly. We map out what it will take to ensure your business is truly fit for the purpose of attracting positive interest in the market. And while recognizing those on-going capacity issues along the way, we do (and don’t) just advise. We turn the journey to a transaction into a project and co-drive it with you end-to-end.
Ultimately, if you decide at the time that you actually don’t want to sell – needs and aspirations change – the worst outcome is that you will have significantly strengthened your on-going growth prospects!
Hesitating about getting into the ready position may still be an option, but it doesn’t need to be a choice! Talk to us ????