I read the article on the Perfect Storm a few weeks ago and the information is applicable to the Printing Industry.
There’s a Perfect Storm Approaching
What are the prospects for transferring those businesses when the owner is ready? The need to liquidate ownership will impact all of us, young and old, as the boomers try to capture the wealth that they have created over their lifetime. But there is good reason to believe that there is going to be far less of it than they might expect.
In fact, the elements of a perfect storm are brewing.
If every owner in the over 53 crowd is depending on selling their business to fund the next stage of their life (be it retirement or something else), the amount of capital required to close all those transactions is over $10 trillion dollars.
Where is the money going to come from to fund those acquisitions?
There has been a stock market bubble, a housing bubble, a dot-com bubble, but never before have we seen an owner demographic bubble like this.
This “age wave” is coming like a tsunami.
There is currently about $535 billion in funds available (“private equity”) to acquire businesses — nowhere near the amount of equity needed to do even 10% of the transactions that will be up for sale in the near future. Even if fresh investment capital becomes available, the lack of availability of funds will drive values down significantly.
There are over 7,700 companies in inventory that are currently owned by Private Equity firms that will become available in the near future as investors look to cash in.
There will be lots of competition for the retiring business owners and this will drive prices down.
There will not nearly enough funds to satisfy all the sellers looking to transact. Private equity fundraising won’t be able to keep up. Limited funding will make buyers very selective and only the A++ deals will get done and even they will have reduced purchase price multiples.
The economy goes in cycles and there is only about another three years left to the current cycle.Can an owner really afford to wait it out until the market cycles back? It may take significantly longer than any time in the past. What’s the result? Only the best deals — maybe top 10% — will get transacted. If owners miss this current cycle they will have to wait at least eight years until the market starts to turn in favor of doing deals again, all the while, the boomers are flooding the market with their companies up for sale.
So, if you are a business owner, with thoughts of selling anytime in the next few years, how do you position your company to maximize its valuation in a very competitive market?
First: Establish a sense of urgency and a realistic view of the value of your business.
Second: Get a road map developed now to increase value. This can be done without significant growth, dramatic improvement in earnings or even increasing your debt. Hitting the current seller’s market window means getting the business ready for a sale. .
Third: Create priorities for how you focus your efforts over the next 2-3 years. You’ve spent a lifetime working “in” the business, now it’s time to start working “on” the business.
This isn’t like selling your house where you can get it market-ready in a month or so.
The storm is coming so seek an experts advice to help protect your company's value. The issues here are vast and complex so find a professional who has experience in your business segment. You can’t go it alone and expect to be successful.
After all, you still have a business to run and other demands on your time. Qualified advisers can help you plan and execute a value enhancement process that will get you where you need to be.
Boomers have been a major driver of economic growth for decades. This demographic group turbocharged rates of home ownership, consumer spending and, most important of all, employment. Everyone and every sector of the economy has been affected by this generation.
Will their business ownership legacy be another boon or a victim of a perfect storm?
Information Source Gary Ampulski | April 8, 2015
In addition to this information, Mr. Gallup in a frank interview with Business Week also went through the economy by the numbers. His accurate assessment of the numbers tell a different story than the one we are getting from our leadership. The numbers show under employment and a net loss of over 300,000 business since 2012. The current trend is there are approximately 300,000 new businesses being established each year. This is offset by 400,000 business closing each year..