Buying or Selling a Business during the COVID-19 Recession
With the COVID-19 Pandemic, now is a challenging time for a lot of things, including buying or selling a business. However, the good news is we have helped a number of our clients to sell their businesses since the Pandemic lockdown started in March. As with anything worthwhile, it is a challenge that can be overcome.
Buying or Selling a Business with Social Distancing
One of the benefits of the process of buying or selling a business is that the whole process can be done with safe social distancing measures. In fact, you don’t even need to
meet at all unless both buyer and seller want to meet. And even then it can be done keeping 6 feet apart and with everyone wearing a mask. In some cases, our clients have done that, and in other cases, they have done everything via email, video conferencing, and phone calls.
What Businesses are we selling during the Pandemic?
Synergy Business Brokers has sold several companies in the last few weeks. One of the businesses was an obvious choice for buyers. A cleaning services company that cleaned, among other things, Health care facilities and medical offices. Naturally, there would be a lot of interest in this type of company. But other companies are not as obvious.
We sold two property management companies. The buyers felt that these companies would continue on well despite a recession and COVID-19. Property Management companies have regular customers that rely on them to get properties rented and repaired, collect bills, and handle tenant issues or complaints. We also sold a software company which had regular customers that relied on their software product for critical business functions.
The most recent one that we just closed on provided oil recycling services to restaurants. Their customers were closed except for takeout and delivery, but the buyer and seller were motivated to make it happen. The seller reduced the price a bit to compensate for the fact that they didn’t have much money coming in during the lockdown but the buyer was confident that the business would rebound once restaurant seating is opened.
What Types of Businesses are in demand during a recession?
Synergy Business Brokers has made it through the great recession. The types of companies that buyers want to purchase during a recession are those that are most likely to continue to do well during these times, including:
- Companies that supply Essential services
- Healthcare & Medical Businesses
- Consumer Staple Product Distributors or Manufacturers
- Companies that provide Products that Businesses can’t do without
- Businesses with monthly recurring revenue
- Manufacturers & Distributors of Healthcare Products
- Food Manufacturing & Distribution Companies
Of course, in the Pandemic, businesses that can effectively deliver their goods and services such as e-commerce companies have been thriving. Technology companies have been doing well as businesses rely more on connecting their employees, suppliers, and customers via technology. Companies that can make much needed medical supplies have seen their businesses jump.
With a changing climate, some businesses adapt and pivot and continue to do well while others have a tough time.
Valuing Companies during a Recession
Business Valuations are never an exact science, but it becomes even more difficult when you have a combination of a recession and Pandemic. In most cases, business valuations are done based on a multiple of a company’s earnings. Many buyers will take a look at an average of the 3 years’ earnings and factor in trends and whether the company is likely to bounce back to previous pre-recession levels or whether their downward trend started before the recession hit. It is important for business brokers and buyers to have monthly profit and loss statements so they can see the monthly trends. For more, you can read factors that go into business valuations.
Timeline for Selling a Business during the Pandemic
Our typical timeline for selling a business is 6 – 9 months. While this might take longer during the Pandemic, it might not either. In some cases, a buyer may be very motivated to get into a good company quickly. With businesses that are doing well during this time, there can be a number of buyers that all want the same business. In this case, a buyer may be likely to move even more quickly before someone else buys the company.
Steps for selling my company during a Recession
The steps for selling a business are the same during a recession as in a normal time. The time that each step takes can vary depending on a number of factors. That’s why its essential to have good communication between buyers, sellers, Business Brokers, and attorneys, and accountants. You can read more about Synergy Business Brokers’ 15 step process for selling a company.
Buying a Business during the COVID-19 era
If you are someone that can’t deal with uncertainty, then buying a business at any time may not be the right choice. Uncertainty is even more likely during the COVID-19 age when no one really knows when things will get back to normal. It may take a long time. However, some businesses will continue to do well during this time, and some won’t. Buying a business requires a certain leap of faith in your abilities to keep things moving in the right direction despite the effects of COVID-19 on the economy and your industry and business in particular.
Some industries, such as healthcare, technology, essential services, and consumer staple products, are more likely to be insulated from the effects of COVID-19. These are the companies that most buyers gravitate towards. However, buyers also look at other industries such as construction, manufacturing, and distribution, which are likely to bounce back from pent up demand when the economy resumes to the new normal. As long as you have a willing buyer and seller that can agree on a price and terms than a deal can be made.
Businesses for Sale
Please view our current Businesses for sale. You can sort based on industry, price, location, etc. If you find a business of interest, you can sign our electronic NDA to receive more information. For some of our popular industries for sale during the Coronavirus era, please visit the industry listings below
Mergers & Acquisitions during the COVID-19 Recession
Mergers and Acquisitions during the COVID-19 Recession can often make good sense for companies for a lot of reasons including:
- A company with more resources can expand by acquiring a company that needs financial help during the COVID 19 Recession
- Two companies can expand by cross-selling each other’s customers with more products and services
- A healthcare company can get its products and services to more people through an acquisition by a larger company
- A company with great technology can expand faster by being acquired by a company with a more extensive sales and distribution network
- Companies in the same industry can decrease costs through economies of scale
- An investment from a well funded private equity group can lead to a more rapid expansion
Due Diligence and COVID-19
Due Diligence is made a bit more difficult with the coronavirus. However, we have made it work. Mostly everything can be done remotely via email, dropbox, zoom, and meetings with social distancing if necessary.
Virtual Closings
Most closings can be done virtually with documents being signed electronically and funds being wired to close the deal. It feels just as good to get the funds sent electronically as to get a check. The buyer feels just as good, knowing that he has purchased a business safely.
Synergy Business Brokers
Synergy Business Brokers has successfully sold a number of companies during the COVID-19 Pandemic, and we anticipate many more closings during this time. We focus on selling companies in technology, healthcare, manufacturing, distributions, services, and construction that have annual revenues of $700,000 to $50 Million. If you are interested in selling a business like this, we can help you navigate this difficult time period to get a successful transaction for you and the right buyer.
Our Business Brokers are located in Texas, New York, New Jersey, Massachusetts, Pennsylvania, Maryland, Louisiana, and Connecticut, and we sell businesses throughout most parts of the country. We utilize our database of over 30,000 potential buyers and a confidential marketing program to get your company sold. There is no fee for our services unless we sell your company.
To contact us, please complete our online form or call (888) 750-5950. One of our Senior M&A Brokers will follow up with you for a confidential consultation.