Due to the pandemic, is there an increase in the number of owners selling?

searcher profile

May 16, 2020

by a searcher from Babson College - F.W. Olin Graduate School in Hingham, MA, USA

Prior to the pandemic, I spoke with searchers frustrated that it was hard to get firm commitments from owners to close deals. And the deals were generally at higher multiples than traditionally exist when buying small businesses.

Question out to searchers - has the dynamic changed significantly over the last couple of months? Are you finding more people willing to commit to deals?

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commentor profile
Reply by a searcher
from California State University, Los Angeles in Beverly Hills, CA, USA
I think this is a great question and one that we all have on our mind. In my experience, it takes some time for companies to feel the affects of this kind of downturn. Couple that with the banks giving grace periods, regulators from the banks giving banks grace periods, and the amount of free and cheap capital being injected into the business world - Things are being delayed. Moreover, with the amount of capital being injected, we are going to see multiples for good companies increase significantly and the space become more competitive. The distressed deals, as was mentioned above, may come to more fruition. However, it is a very risky endeavor to try and turnaround a company for many reasons. However, the biggest one is simply employee fatigue. Having an owner that was already stressed passed this down to every one of his employees. So, it takes a very confident leader to jump into a turnaround situation and capitalize on it. Not to discourage anyone from doing this, however, as it can be extremely lucrative. I would say we will see a slow increase on the sell pick up sometime by end of this year and accelerate into early next year as full FYE numbers will be available.
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Reply by a professional
from Yale University in Mumbai, Maharashtra, India
I think the lifeline thrown by governments through various packages is giving entrepreneurs a sense of comfort that things could get back to normal. This allows them to be in a state of denial I suppose. At the same time, even buyers are not venturing out. The uncertainty overhang does not allow the separation with any degree of comfort of potential winners from losers. As an India, I would say that it is in Trishanku state. https://en.wikipedia.org/wiki/Trishanku
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