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Navigating a Buyer's Market: Expert Advice for Selling Your Business

Let the experts at Cerity Partners help you navigate the complexities of transitioning a family business and structuring comprehensive succession plans.

For almost two decades the M&A market has favored sellers, who have become accustomed to a competitive bidding process with multiple buyers, higher than historical multiples, purchase agreements with favorable terms, and relaxed partnerships with strategic and financial partners. As we head into the second half of 2022, it is clear that the M&A market is transitioning to a buyer’s market. Several strong economic and demographic trends are causing the M&A market to shift to a buyer’s market. The demographic trends are:

  • Aging business owner demographic is changing historic supply
  • Consolidation and vertical integration activity are beginning to normalize
  • Higher interest rates are impacting borrowing economics for buyers
  • Competitive bidding for platform companies is causing price retraction for add-ons

1

Recession on the Horizon

To add to the headwinds in the M&A markets, the state of the economy has bolstered talks of a recession in 2023. Some of the economic data:

  • Historic higher than expected 0.75 basis point rate hike in June
  • Lowered real growth expectations, with Conference Board GDP estimates reduced to 1.3% for 2022 and 0.2% for 2023 [1]
  • Supply chain issues that continue to disrupt manufacturing, goods, and services
  • Oil prices, while having abated slightly in recent months, remain elevated
  • Fastest inflation increases in the past 40 years, with current inflation running at 8.5 % in July

As a business owner, do you have enough gas in the tank to make it to the next recovery and/or until the next seller’s cycle?

2

Recessionary Side Effects for Business Owners

  1. Cash Flow Challenges: Limited access to capital at higher rates.
  2. Lower Margins: Expending valuable resources on low-margin products/services negatively impacts cash flow.
  3. Ineffective C-Suite: Little or no management team to run the business after your departure.
  4. Bad Decision Making: Lack of financial transparency limits fact-based decisions.

3

How Preparedness Planning Impacts Sale Value

Preparedness planning ensures that business owners receive maximum value at sale. It also ensures sellers receive the unlocked value and not the buyer. Below are multiple ranges and how lack of preparedness minimizes value.

Example of Value Range Based on Multiples of EV

Why should owners prepare before selling? In this example, there is a $13.5 million gap between a 4x multiple and 7x multiple at sale.

4

Enterprise Multiples

5

Understanding How We Got Here

The average age of a business owner in 2005 was mid-to-late 40s. In 2008, many business owners suffered large losses in value due to the Great Recession of 2007-2009. Over the next ten years, many business owners rebuilt enterprise value, and those that sold between 2018-2019 realized some of the highest valuations and sale prices in 20 years. It is important to mention that business values, deal terms, and multiples were favorable to sellers during this time. A large reason was the $2 trillion in dry powder from financial buyers competing to acquire companies.

Fast forward to June 2023, and we see:

  • That same business owner is in their late 60s or early 70s;
  • Has been through one of the most challenging business environments due to the pandemic; and,
  • Is staring down one of the most challenging economic downturns in the past twenty years.

6

Things to Think About

  • Cost of goods/services sold will continue to go up, causing some of the increase to be passed on to the customer, potentially pricing products/services out of the market.
  • Buyers request four years of financials when performing due diligence. Financials trending flat or upward during those four years positively impact your sale. Financials that are volatile or trending downward will negatively affect business value.
  • Over the next eight years, 8.4 million business owners will try to sell their businesses, creating a competitive seller’s market.
  • Are you and your business prepared if a buyer knocks on your door?

7

Impact of Economic Cycle

  • More competition creates a more selective buyer’s environment.
  • The purchase terms are more restrictive and will have a higher performance matrix if there is an earn-out attached to the sale.
  • We expect lower multiples, especially for less attractive businesses.

In conclusion, the once seller-friendly M&A market is now showing signs of a shift towards a buyer’s market. This change can be attributed to several economic and demographic factors that are influencing the market conditions. As the M&A market continues to evolve, it is essential for both buyers and sellers to stay informed and adapt to these changing conditions. Although the transition may be challenging for some, it also presents new opportunities and potential for successful deals.

Our team of experts specialize in assisting business owners in working through the complexities of transitioning a family business and structuring comprehensive succession plans and growth planning. Contact our team for a complementary consultation on your exit planning strategy.

Meet Brett Dearing

Brett Dearing is a Partner and Exit Planning Specialist in the New York office with almost thirty years of experience working with privately-held...Read more

Meet Brett
Brett Dearing

Please read important disclosures here.

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Your Introduction to a Trusted Financial Partner Awaits

Our Concierge Program offers a simple, personalized approach to finding your ideal financial advisor.

Schedule your complimentary 30-minute discovery call so we can understand your unique financial and life goals and match you with the advisor most well suited to help.

Dustin Ribergaard's headshot

Dustin Ribergaard

Lead Concierge

Find your ideal financial advisor with our personalized Concierge Program.

Schedule a complimentary discovery call now:

Book Time Online Now

Where are your liquid assets held?

Book your meeting

This 30-minute call with me is designed to better understand your unique financial and life goals and match you with the advisor most well suited to help.

Looking forward to
speaking with you!

Dustin Ribergaard

Lead Concierge

Dustin Ribergaard's headshot

Thank you for your interest

Thank you for your interest in our financial services. We appreciate the opportunity to connect and learn about your financial goals. A representative will be in touch to discuss your financial needs.

Thank you for booking a meeting with us!

We look forward to connecting with you soon.

Here are some valuable insights to read before your meeting

blog image background

Natalia Tchetchoulina

Partner

Estate Planning

How to Pass Down Prized Jewelry, Art, and Cars  

May 28, 2025 - Contemporary collectors want to convey their legacy to future generations. Learn how to properly pass down jewelry, art, and more to ensure the legacy endures.

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May 29, 2025 - The Name, Image, and Likeness (NIL) era has transformed collegiate athletics, but that opportunity comes with responsibility. Learn how to avoid five common mistakes.

blog image background
Economic and Market Outlooks

Video: June 2025 Economic & Market Outlook

June 2, 2025 - Markets have rebounded, and recession risks have eased—Jim Lebenthal weighs in on what investors should watch in this market outlook.

  • General inquiries: click here
  • Institutions and non-profits: click here
  • Corporations: click here

Learn about our Privacy Policy

By clicking “Schedule Now”, you acknowledge that we collect your name, email address and phone number to respond to your inquiries and provide you information about our products and services in accordance with our Privacy Policy. If you are a California resident, please see our CCPA Notice to California Residents.