Is 2022 a good year to sell a business?
Based on our fast start in 2022 and our record year in 2021, this year is definitely shaping up to be an excellent year to sell a business. In less than two weeks of 2022, we have already closed three deals, and our revenue was up over 50% in 2021 compared to 2020. And boding even better for 2022 is the fact that the second half of 2021 was our best ever, with over 75% of our revenue coming in the latter six months of 2021. In addition, we have 28 current accepted offers, so all the momentum is shaping up for 2022 to be one of the best times ever to sell a business. It is a seller’s market, with most of our opportunities receiving multiple offers. During 2021 we sold businesses in every industry that we specialize in, including construction, distribution, healthcare, manufacturing, services, technology, and transportation. So what’s driving all of the deal activity in 2021 that is leading into 2022.
Market Conditions for selling a company in 2022
With the ongoing pandemic, there is pent-up demand for buying a business. Early on in the pandemic, buyers were worried and afraid of pulling the trigger on purchasing a business. However, private equity groups and wealthy investors are sitting on a lot of money they need to invest, so now is the time they are putting this money to work. Interest rates are very low, so access to capital also makes 2022 an excellent time for selling a business with buyers eager to take advantage of these low rates and banks optimistic about making loans.
In addition, there is the potential legislation to raise capital gains taxes and the political uncertainty around this that leads some sellers to want to try to take advantage of the current lower tax rates. Having said this, we don’t usually recommend that business owners sell their business just to take advantage of the right timing to sell. It is a very personal decision, and you want to feel confident that you are ready to sell. But if you do decide that you want to sell to retire, take more time off, travel, or work on another business venture, then we can confidently say that 2022 is a good time for you to sell your company.
A look back on 2021 and what it means for 2022
Let’s dive a little deeper into our numbers for 2021 and the current momentum heading into 2022. During 2021 we sold 24 businesses, and 19 of the sales were made in the final 6 months of 2021. And at the beginning of 2022, our current 28 written accepted offers are a record number of deals that are in due diligence.
Over the last two years, our revenue has increased 50% or more each year. Heading into 2022; we are set up for continuing this growth rate with an increased number of accepted offers and deal activity. While we’re pretty sure that the M&A market, in general, isn’t growing at this rate, we do see favorable market conditions overall. Reuters has said that M&A deal activity is up 24%.
Keys to successfully selling your business in 2022
Even though the market for selling a business is currently hot, you do want to take the following steps to ensure that you are doing what you can to maximize your sale price and sell your business as efficiently as possible. Some of the things that you can do to help your Business Brokers/M&A Advisor to sell your business include:
- Gather your financial records. In any business sales process, the buyer will need to see clear and accurate financial statements, including the last three years’ tax returns, current profit and loss statements, and balance sheets. In addition, we’ll work with you to identify the true owner’s net cash flow that includes the perks and benefits that you derive from owning the business in addition to your salary and net income—things like IRA contributions, health insurance, company cars, etc.
- Have a confidential conversation with your business broker about the pluses and minuses of your business. Typically we’ll position areas that you are weak in as growth opportunities for a new owner to improve the business. We’ll also need to gain an understanding of your customers, employees, suppliers, products, services, competitors, and your role in the company.
- Once we have this information, we’ll analyze this to provide you with a possible asking price. The market is strong and our average deals size has increased, but you still want to price the business realistically to maximize the number of interested buyers. This will give us the maximum leverage to negotiate your business’s best price and terms.
- Use a business brokerage firm that has experience in your industry. They will understand how to position your business correctly and also have access to buyers in your sector.
- Keep an open mind. Some sellers think they know exactly what type of buyer is best to take over their business. However, we have found this can vary quite a bit on a deal-to-deal basis. So in some cases, the buyer that offers the best price and terms may be a larger company in your industry. Other times, the buyer with the best offer might be a private equity group, a company outside your industry, or an individual buyer that has the financing in place to purchase your business. We’ll work through these options as offers are provided to you. We understand that it is essential for most sellers to feel comfortable with the buyer, and we certainly respect that. So the final decision is yours.
- Have a good lawyer and accountant. Once deal terms are accepted, you want you and your team to work quickly to provide the necessary due diligence items and negotiate a purchase and sale agreement. Momentum is essential, and although some issues can come up to derail a deal, we’ll work with you and the buyer to try to overcome any problems and keep the deal moving forward.
- Think through what length of transition you are willing to provide. Keep in mind that it doesn’t have to be full-time. Most transitions start with the seller working full time to assist the new buyer, but sometimes they can become part-time help after a few weeks. This will allow you to transition into retirement and not go from working full time to being fully retired right away.
Buying a Business in 2022
If you are interested in purchasing a business in 2022, please view our current businesses for sale. If you find one that is of interest please fill out our electronic Non Disclosure Agreement on the Listing of interest for more information. Even though it is a seller’s market for the sale of a business in 2022, many buyers find that with the improving economy, over time the businesses that they purchase will provide an excellent return on investment. Usually, the best buyer for a business is one that can unlock unrealized value in a business to improve and grow it, both in terms of revenue and profit.
Contact us to sell your company in 2022
If you have read this far, you’re probably on your way to seriously considering selling your business in 2022. Synergy Business Brokers offer a free, confidential consultation. We’ll discuss your needs and walk you through your options. We’ve been selling businesses since 2002 and have been recognized as one of the best business brokers in the United States by over seven independent rating organizations. You can read more here.
To get started with your confidential conversation, please provide us with your contact information, and one of our Senior Business Brokers will follow up with you.